gigante · tiendas soriana s.a.b. de c.v. (tiendas soriana), we were able to confirm that the jobs...

2008 Annual Report

GR

UP

O G

IGA

NT

E | 2008 A

nnual Rep

ort | Gig

ante greater than ever

Gigantegreater than ever

Investor information

Corporate headquarters

Grupo Gigante, S.A.B. de C.V.

Ejército Nacional No. 769 - A

Col. Granada

Delegación Miguel Hidalgo

11520, México D.F., México

Tel.: (52) 55 5269 8000

Fax: (52) 55 5269 8169

www.gigante.com.mx

Depositary bank

Bank of New York

620 Avenue of the Americas

Nueva York, N.Y. 10011,

USA

CFO

Federico Coronado

Tel. (52) 55 5269 - 8237

[email protected]

Director, Fundación Gigante

Juan Manuel Rosas

Tel. (52) 55 5269-8227

[email protected]

This annual report contains information regarding Grupo Gigante, S.A.B. de C.V. and its subsidiaries, based on the assumptions of its management. This information, as well as statements made about future events and expectations, is subject to risks and uncertainty, as well as to factors that may cause that the results, performance or progress of the Group might differ at any time. These factors include changes in general economic, political, government and commercial conditions on the national and global level, as well as change in interest rates, inflation, exchange-rate volatility, product prices, energy situation and others. Because of these risks and factors, the real results may vary substantially.

Director of Corporate Affairs, Media

Relations and Communications

Sergio Montero Querejeta

Tel. (52) 55 5269 - 8121

[email protected]

Investor relations

Emilia Maldonado Pavón

Tel. (52) 55 5269-8000 ext. 8727

[email protected]

GRUPO GIGANTE is a holding company that is quoted on the Mexican Stock Exchange since 1991.

The subsidiaries in the Group include GIGANTE GRUPO INMOBILIARIO, the division that operates and develops real estate projects, RESTAURANTES TOKS which operate under the concept of “casual dining”, and the SUPER PRECIO stores, which offer permanent discounts.

The Group also has a share in OFFICE DEPOT, the largest and most important chain of office supplies and furniture, stationery and electronic items in Mexico and Central America.

Through FUNDACIÓN GIGANTE, GRUPO GIGANTE has institutionalized social responsibility programs, strengthening a tradition and commitment that began more than four decades ago.

Contents

1 Financial Highlights

2 Report of the Chairman of the Board

and Chief Executive Officer

6 Office Depot

10 Restaurantes Toks

14 Super Precio

18 Gigante Grupo Inmobiliario

22 Fundación Gigante

26 Report of the Audit Committee

28 Report of the Governance Committee

30 Report of the Finance and Planning Committee

32 Report of the Strategic Consulting Committee

34 Board of Directors & Committees

35 Financial Statements

Regional distribution of stores

Metropolitan areaCentral areaNorthNortheast

SoutheastSouthwestCentral America

15%

4%

11%

7%2% 4%

Sales breakdown by format

Office DepotSuper PrecioRestaurantes Toks Gigante Grupo Inmobiliario

9%

8%

20%

Sales Floor Area by Format Units Sq. Feet

Super Precio 126 30,758

Restaurantes Toks 85 18,134 (seats)

Office Depot 189 252,494

Total 400 283,252

63%57%

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Financial Highlights

2008 Annual Report

1

Consolidated statements of income (In thousands of pesos)

2008 2007 % variation

Net sales $ 8,385,495 $ 6,834,153 22.7

Operating expenses 2,610,197 2,128,143 22.7

EBITDA 1,299,120 829,528 56.6

Income from continuing operations 1,029,890 464,987 121.5

Income from discontinued operations 1,780,756 4,264,724 -58.2

Net income 2,810,646 4,729,711 -40.6

Basic earnings per common share $ 2.84 $ 4.78 -40.6

Diluted earnings per share $ 2.82 $ 4.73 -40.4

Common shares outstanding 990,921,977 988,637,769

Price of share $ 12.90 $ 22.00

Consolidated balance sheets (In thousands of pesos)

2008 2007 % variation

Assets $ 21,361,666 $ 30,200,333 -29.3

Cash and cash equivalents 4,755,312 535,491 788.0

Inventories 1,246,430 979,313 27.3

Fixed assets 13,757,057 12,883,652 6.8

Others 1,575,828 8,606,453 -81.7

Discontinued operations 27,039 7,195,424 -99.6

Liabilities and stockholders´ equity $ 21,361,666 $ 30,200,333 -29.3

Trade accounts payable 1,015,851 809,182 25.5

Others 3,006,880 4,383,635 -31.4

Discontinued operations 25,950 6,568,650 -99.6

Stockholders´ equity 17,312,985 18,438,866 -6.1

Dear shareholders:

Without a doubt, 2008 was a year that history will mark in eco-

nomic-financial matters because of the global events that we all

know, which have led to the greatest crisis in recent history, and

which, unfortunately affect our country, bringing great challenges

but also opportunities.

Despite the above, it is with great satisfaction that I am able to report

that the decisions and strategies implemented during the two previ-

ous years, as well as the performance of the Group throughout 2008

allow us to deliver very good results. It is worth noting that we closed

the year with growth in both revenues and profits and as one of the

most solid and strongest corporate groups in the Mexican market. In

fact, same-store sales grew 11%, reaching 7,376 million pesos, while

total sales increased 22.7% for a total of 8,385 million pesos. Gross

profit posted a 35.3% growth, totaling 3,626 million pesos, while op-

erating profit increased 84.1%, reaching 1,015 million pesos.

During this period, a series of strategic decisions were announced

and executed with the goal of strengthening the Group’s business-

es and opening new investment opportunities, among which the

following should be highlighted:

• In the case of Office Depot, we grew maintaining leadership in

the segment and will begin the chain’s expansion in Colombia in

South America.

• The Toks restaurants have consolidated, and based on innova-

tion, greater efficiency and excellent performance, we posted the

greatest growth in the industry.

• In the Super Precio format, we were able to strengthen a business

model that seeks to provide greater opportunities and benefits.

• Gigante Grupo Inmobiliario, the real estate division, was rede-

fined, finding diverse opportunities for development and becom-

ing one of the areas with better expectations.

• After exhausting all contractual possibilities to continue to op-

erate this format and association. Radio Shack was sold to our

international partner, with whom we had operated successfully

in Mexico, in order to obtain a profitable return on our invest-

ment and take advantage of other opportunities in the Mexican

and Latin American market.

An exemplary operation

Focusing now on the transaction reported at the end of 2007 with

Tiendas Soriana S.A.B. de C.V. (Tiendas Soriana), we were able to

confirm that the jobs of more than 24,000 workers in the stores

and distribution centers were protected. Various productive nego-

tiations were conducted with the labor unions representing said

workers to facilitate the transition and, above all, respect the condi-

tions and rights of the workers.

Soriana’s professionalism and reliability in this process should be

commended, confirming that it is one of the most successful cor-

porate groups in Mexico.

We satisfactorily concluded more than 2,800 negotiations with

vendors, the majority of which continued with Soriana, while oth-

ers have also maintained operations directly with Grupo Gigante,

through Toks, Super Precio and Office Depot.

2

Report of the Chairman of theBoard and Chief Executive Officer

Grupo Gigante

The transaction was concluded in accordance with all the corre-

sponding legal and tax provisions, making it an exemplary operation

with great benefits for shareholders, workers and Grupo Gigante.

I would like to take this opportunity to express the recognition of the

group of internal and external collaborators who were instrumental

in the successful execution of this operation. Without their decided

and enthusiastic participation, none of this would have been possible.

Social Responsibility

More than 45 years serving Mexico

This is one of the areas of the Group that brings the most enthu-

siasm and pride, especially for those of us who participate in it.

In 2008 Fundación Gigante (Gigante’s foundation) celebrated five

years of active operation, having granted more than 210 million

pesos in aid to more than 1.8 million Mexicans, especially children;

thereby showing that, where there is a will, it is possible to help

others even in the most difficult moments.

The phrase “Giving is not offering what we have left over, but shar-

ing what we and our families enjoy” is part of the spirit that has led

us to maintain, institutionalize and consolidate more than 45 years

of Grupo Gigante’s philanthropic work.

Consolidation and sustained growth

Office Depot

After an intense negotiation process, which began in mid 2008, the

Group presented an offer to purchase the 50% share of our part-

ner in Mexico. Diverse economic and financial reasons led us to

end the negotiation in a manner different than we initially planned,

but with many positive expectations for the company. Mexico and

Central America will continue along the road to consolidation and

moderate but sustained growth. Now the process of expansion to

South America may begin, particularly in Colombia, where we will

be opening the first store in 2009.

The relationship between Grupo Gigante and Office Depot Inc. con-

tinues to strengthen and we will consolidate further, maintaining the

positive and open ties that we have reinforced in recent years. The

company will continue to innovate and, despite the fact that market

conditions may not appear to be the most appropriate for growth, will

expand cautiously certain that we will maintain our leadership in the

sector and taking advantage of it in order to have a better positioning.

In 2008, areas such as financial efficiency, better management of re-

sources and energy, as well as innovation and development of vendors

made Office Depot a model to be followed in the sector. This achieve-

ment gives us great satisfaction and leads us to continue along the

same line. The opening of 30 stores, 252,494 square meters of total

sales floor area, and more than 31.8 million clients are proof of this.

Radio Shack

Following the anniversary of the contract, which set forth the need

of reviewing certain principles and the status of the two partners

in Radio Shack de México, Grupo Gigante sought the possibility of

maintaining conditions as they were, with the aim of consolidating

the company’s participation in Mexico and initiating its expansion to

the rest of Latin America. However, after not obtaining a favorable

We closed the year with growth in both revenues and profits

and as one of the most solid and strongest corporate groups

in the Mexican market.

2008 Annual Report

3

response for the interests of the Group, it was decided to complete a

very positive negotiation for the sale of our share of the business.

The transaction with Tandy Co. was concluded at a price of more than

560 million pesos, which in terms of multiples was equivalent to more

than ten times EBITDA, outstanding in similar post-crisis transactions,

where the multiples are between three and six times EBITDA. These

resources will allow us to take advantage of other opportunities and

increase the Group’s profitability. We must recognize that, for the

Group, leaving Radio Shack produced mixed feelings, since, together

with our foreign partner, we had successfully developed and operated

the concept for the past 16 years. At this time, we can only extend

our best wishes to the chain for its continued success.

Restaurantes Toks

Once again, the Toks restaurant chain ratifies its excellent perfor-

mance in recent years, during which it has grown overall more than

five times above the industry’s growth rate. In 2008, we created

1,071 permanent jobs and served more than 21 million clients. The

road undertaken by Toks, together with its focus and perseverance

have proven that the formula is successful and that its capacity to

adapt to and overcome adverse economic conditions will continue

being a key factor for Grupo Gigante’s future growth.

Super Precio

A format that has achieved a favorable position in the market; dur-

ing 2008 Super Precio, reached a total of 126 stores in the Mexico

City metropolitan area. The format has been defined satisfactorily

and has posted growth in terms of clients and same-store sales.

These results confirm the acceptance and potential of the format.

Also, it is worth mentioning that we successfully concluded the first

phase of incorporation of the SAP system.

Gigante Grupo Inmobiliario

One of the greatest transformations achieved during the period

was in the real estate division. Following the divestiture of its su-

permarket stores, the company went from being an administrator

of the properties where the Group’s supermarket stores were lo-

cated, to becoming one of the most important real estate develop-

ers in the country.

At the same time, the planning and coordination began of vari-

ous real estate, commercial and residential developments with

high potential and profitability. During 2008, the land reserves

of Gigante Grupo Inmobiliario increased 50%, to more than

330,000 square meters. Among the most relevant projects is

the incorporation of 88 of its stores in Soriana, 33 operating

condominiums, the expansion of commercial spaces and the

rental of privileged locations in Mexico City and other impor-

tant cities. All of this includes more than 120 real estate prop-

er ties of the Group, comprising a total surface area of over

3,116,000 square meters.

A Master Plan was initiated together with the Federal District gov-

ernment authorities (the Mexico City government) for the devel-

opment of different priority projects for the city, which are in a

phase of definition and which will allow us to become in 2009

one of the driving forces for urban and commercial development

in Mexico City.

Among the key elements in the selection of projects are efficiency

and creativity, as well as appropriate financial, social, ecological and

technological aspects. In future years, these projects will include the

consolidation of offices, commercial areas and housing, beginning

in Acapulco.

Gigante Grupo Inmobiliario was and will undoubtedly be a pillar

for economic and social development in Mexico in the years to

come. We are conscious of the fact that conditions will lead us to

be more selective, cautious and responsible, but at the same time

keep us aware not to slow down the pace and take advantage of

the great opportunities that will certainly emerge.

Group Gigante is in an excellent position to grow, invest, attract

productive investments and above all, be an important participant

in the new national environment.

Grupo Gigante

4

2008 Annual Report

5

Timely and intelligent decisions

Thanks to the support of shareholders, collaborators and clients

throughout Mexico, we can proudly say that during 2009 Grupo

Gigante will maintain moderate but sustained growth, preserving

and generating direct and indirect jobs, placing above all the well-

being of the communities where we operate and serving the re-

quirements of our shareholders, collaborators and vendors.

Given the current environment, the Group’s expectations and the

global events that we are all aware of, which began in September 2008,

we are reassessing our Strategic Plan to determine our direction.

Once the Strategic Redirectioning Plan is revised to include the

new challenges of the economic-financial crisis, it will be fine-

tuned by the Strategic Consulting Committee and presented to

the Board of Directors for its authorization during the first quar-

ter of 2009. The broad guidelines under which the Group will be

working are:

1. Sectors to continue developing and investing in:

a. Specialized retail

b. Services

c. Real estate

2. Within the operating businesses, in addition to protecting the

jobs of our collaborators, we will work on the consolidation and

selective growth of new businesses, through the allocation of

the Group’s assets, which will be based on criteria of efficiency

and profitability.

3. Identification of new formats and opportunities that lead us

to develop new businesses within the operating sectors, in

line with the experience of the Group, on selective and profit-

able bases.

It is in this way that we are able to see a Group that is more giant

than ever, emerging from a healthy and stable financial situation,

without foreign-currency debt exposure, and no other commit-

ment beyond those of its daily operations, with a solid balance

sheet and properly invested cash and assets, which will allow us to

take advantage of the opportunities that we are certain will come.

This Report only confirms what we have been disclosing in a

consistent and transparent manner through the public, legal and

authorized media, and ratifies that Grupo Gigante today is at one

of its best moments. We have a strong Mexican company that

is committed to the country, supporting regional development,

employment generation and the attraction of both national and

foreign capital toward productive projects. This gives us great pride

and satisfaction.

It should be mentioned that, in compliance with the applicable

provisions, the policies and the accounting and information crite-

ria followed by the Corporation in the preparation of the financial

information are explained separately in the notes to the financial

statements. We also inform you that, as part of the meetings of

the Board of Directors held during 2008, we should highlight the

following: approval on April 3rd of the Policy for the Repurchase

of Company’s Shares; approval on October 21st of the Company’s

Social Responsibility Policy, and approval on December 5th of the

sale of Radio Shack.

We are going for more, with integrity and quality

I am fully aware of the integrity, quality, dedication and commit-

ment of all of us that are part of this great community of Grupo

Gigante, which through its values and hard work will again be

one of Mexico’s pillars to foster the changes in the country we

all want and deserve. The actions reported in this document are

proof of this effort, of a Group that under the current circum-

stances is in an excellent position to grow, invest, attract produc-

tive investments and above all, be an important participant in the

new national environment. The selective and profitable expan-

sion of the Group, as well as the identification and development

of strategic opportunities will be our objective in 2009 and the

years thereafter.

Grupo Gigante,

more giant, solid and

committed than ever!

Sincerely,

Ángel Losada Moreno

Chairman of the Board and Chief Executive Officer


The growth and development of Office Depot de México in 2008 confirm that it is the largest, most important retail chain of office supplies and equipment, stationery and electronic items in Mexico and Central America.

Grupo Gigante

6

Financial efficiency,

innovation and vendor

development have made

Office Depot a model to be

followed in the sector.

Office Depot

The growth and development of Office Depot de México in 2008 con-

firms that it is the largest, most important retail chain of office supplies

and equipment, stationery and electronic items in Mexico and Central

America.

The experience accumulated in 14 years has allowed us to meet

the demand of the domestic and international market through vari-

ous sales channels: stores, telemarketing, online and corporate sales. At

the same time, we have complemented our supply of products with a

broad assortment of private label items.

Financial efficiency, innovation and vendor development have made

Office Depot a model to be followed in the sector. In 2008 we opened

30 units in Mexico, with which, at the close of the year, we had a total

of 189 stores, 18 of which are outside the country: 5 in Guatemala, 4 in

Costa Rica, 2 in Honduras, 3 in El Salvador and 4 in Panama.

Management has emphasized and will continue to focus on the de-

velopment of projects that allow Office Depot de México to continue

being a leading company that provides outstanding service and quality

in its products. In line with these objectives in 2009 we will enter the

market in Colombia.

200190180170160150140130120110100

160

189

138

116

05 06 07 08

7

Office Depot (Units)

In 2008we opened 30 UNITS

in the Mexican Republic.

Grupo Gigante

8

2008 Annual Report

9

Our “passion to serve” has been a key factor in positioning our restaurant chain in a market where Toks’ value surpassed the competition.

Grupo Gigante

10

The results for 2008

exceeded our sales

and profitability goals

compared with 2007.

Restaurantes Toks

Our “passion to serve” freshly prepared

food and beverages, offering unique taste

and warm, pleasant service, as well as the

opening of 12 new units during 2008 were

key factors in positioning our restaurant

chain in a market where Toks’ value surpassed the competition.

The effort has been fruitful and the results for 2008 exceeded

our sales and profitability goals compared with 2007. Average sales

per unit, customer flows and average ticket sales increased.

We understand that well-trained personnel is the basis for the

expansion strategy of the business and, as a result, in 2008 we started

the Toks Institute, which will allow us to continue offering outstanding

service at each new branch.

At the close of 2008, we had a total of 85 units, equivalent to 18,134

seats, representing a 16% increase from the number of seats in 2007.

In 2009, we will multiply our efforts to continue differentiating

Toks restaurants from the rest of the sector and will maintain our

position as the preferred choice for consumers.

57

63

90

85

80

75

70

65

60

55

50

74

85

05 06 07 08

2008 Annual Report

11

Restaurantes Toks (Units)

Grupo Gigante

12

In 2008 we opened 12 UNITS

in 8 states of the Mexican Republic.

2008 Annual Report

13

2008 was decisive for the consolidation of the Super Precio stores, not only because we were able to detect and take advantage of areas of opportunity within their operation, but also because of the achievements reached.

Grupo Gigante

14

No units were closed

in 2008, showing

the efficiency and

profitability of our

126-store network.

Super Precio

2008 was decisive for the consolidation of

the Super Precio stores, not only because

we were able to detect and take ad-

vantage of areas of opportunity within

their operation, but also because of

the achievements reached.

At the close of the fiscal year, this format recorded an increase

of 49% in sales floor area with the opening of 40 units, all of them in

the Mexico City metropolitan area. For the first time in the history of

the Super Precio format, no units were closed in 2008, showing the ef-

ficiency and profitability of our 126-store network.

Growth was accompanied by profitability; since the response by the

consumers to our low price strategy and our extensive catalogue of

private label products has been very gratifying.

In February of 2008 we began to operate our own distribution

center and toward the end of the year we implemented the SAP tech-

nological platform in the areas of finance, accounting and retail sales.

All these advances will undoubtedly generate important savings in re-

sources, a factor that is indispensable for solid growth.

In order to reach more clients in 2009, we will continue to seek the

best locations and proceed with our expansion plan in the Mexico City

metropolitan area.

56

79

130

120

110

100

90

80

70

60

50

86

126

05 06 07 08

15

Super Precio (Units)

In 2008we opened

40 UNITS in the metropolitan area

of Mexico City.

Grupo Gigante

16

2008 Annual Report

17

Grupo Gigante

18

Gigante Grupo Inmobiliario has a clear long-term strategy, focused on developing real estate projects that generate value, both for the business and its clients.

Office Building Project, Mexico City

San Esteban Shopping Center

The results obtained in the

first year of operation of the

business confirm that the

strategy of focusing on real

estate development was the

right decision.


Gigante Grupo Inmobiliario has a clear long-

term strategy, focused on developing real

estate projects that generate value, both for

the business and its clients.

During 2008 we set the bases that will

allow a continued and sustained growth.

The first step was the implementation of

processes and cutting-edge technology

in the management, collection, operating

control and commercialization of future

projects. At the same time, we focused on

the consolidation and integration of our

work team.

Following a careful selection within a

broad portfolio of prospective projects, we

approved the development of several shop-

ping centers and office buildings that offered

the best return on investment. All of these

projects will undoubtedly strengthen our

position in the market by diversifying our

real estate portfolio.

Among the developments underway, is

an office building in Mexico City as well as

three shopping centers: “Acapulco Diaman-

te” in the state of Guerrero; “San Esteban”

in Naucalpan, and “Atizapán” in Atizapán de

Zaragoza, both of which are located in the

State of Mexico. We have also been desig-

nated as developers of the Lomas Verdes

shopping center in Naucalpan in the State

of Mexico.

In addition to the startup of the first pro-

jects, another priority was to increase our

land reserves. Currently, we have a reserve

of more than 330,000 square meters in di-

fferent locations throughout Mexico. This will

enable us to grow in commercial, office and

housing projects, serving different economic

segments of the population.

The results obtained in the first year of

operation of the business confirm that the

strategy of focusing on real estate develop-

ment was the right decision.

We believe that Mexico offers growth

opportunities; therefore, in 2009 we will con-

tinue to maximize the value of our assets,

adhering to the discipline that has characteri-

zed our investment processes.

19


Central area

South

Northwest

North

Western

At the close of 2008, we had more than

120 REAL ESTATE PROPERTIES and more than

900 commercial spaces, comprising a total surface area of over 3,116,000 square meters.

Grupo Gigante

20

Lomas Verdes Shopping Center

2008 Annual Report

21

After almost six years in operation, Fundación Gigante continues to support the people that need it the most.

Grupo Gigante

22

Fundación Gigante

collaborated with various

associations, universities

and non-government

organizations, among others,

in projects mainly of a social

and environmental nature.

Fundación Gigante

More support than ever

After almost six years in operation, Fundación Gigante continues to sup-

port the people that need it the most , and in 2008 it reinforced the

endeavor of providing aid, which has developed in Grupo Gigante as

part of its social responsibility efforts through the contribution of its

subsidiary and affiliate companies, Office Depot, Toks, Super Precio and

Gigante Grupo Inmobiliario.

Following its commitment to provide aid and support, Fundación

Gigante collaborated with various associations, universities and non-gov-

ernment organizations, among others, in projects mainly of a social and

environmental nature. It also motivated shareholders, collaborators and

vendors to become actively involved in many of these actions in order

to continue contributing to the development of the community.

During 2008 we were able to consolidate the work begun by our

founder, Ángel Losada Gómez more than 45 years ago, and reached a

record figure of 210 million pesos in aid, channeled through Fundación

Gigante, to more than 1.8 million Mexicans. A dream come true of which

we are proud, but not satisfied. There is always more that can be done.

It should also be highlighted that during 2008, our Board of Direc-

tors, upon the proposal of its Governance Committee, approved the

Social Responsibility Policy of Grupo Gigante, in an effort to further

institutionalize our social commitment and set clear guidelines for the

Group, and its subsidiaries and affiliates.

2008 Annual Report

23

Particular attention was given to initiatives that promote health

and nutrition, education, ecology and aid during natural disasters,

to name some of the most outstanding activities performed during

the year, among which are the following:

Health and Nutrition

Conscious of the fact that nutrition and health are some of the

fundamental bases for the development of children, Fundación

Gigante allocated resources and supported institutions that work

in favor of the fight against cancer, AIDS and obesity, among others.

Teletón 2008

The participation of Grupo Gigante in Teletón, through its affiliate

Office Depot, has consolidated in an altruistic tradition that benefits

thousands of children and offers hope of a better life to their fami-

lies. Our collaborators, vendors and clients have become involved

in this important event, fostering the participation of society to help

young people with disabilities to adapt better in their daily lives.

Psychological, Medical and Legal

Support Program for Women

Fundación Gigante continued to give aid to this women’s support

program through the Fundación Origen. In 2008, the participation

of all the Group’s subsidiary and affiliate companies provided guid-

ance and channeled help to more than 3,000 women who have

required this service.

Alliance with the Mayo Clinic

The Foundation, in alliance with the Mayo Clinic, created in 2008

the program “Está en ti, mejora tu vida” (“It is up to you to improve

your life”), of which the main objective is to achieve healthier life-

styles. With the start of this program, we expect to motivate all

collaborators within Grupo Gigante’s companies and community,

to look after their health and that of their families. We have also

motivated our clients to take care of their health through efforts

directed by the Toks restaurants.

Education

Convinced that the development of our country is based on the

quality and level of education, we contributed with various institu-

tions and non-government organizations to support education.

The “Rounding up” for Education 2008 Program

As pioneers in the organization of “rounding up” programs, this

year Office Depot joined the cause through the program promot-

ed by the Unión de Empresarios para la Tecnología en la Educación,

A.C. (Union of Business Entrepreneurs for Technology in Education,

known as UNETE).

Link with Universities

Fundación Gigante maintains links with various institutions of higher

education. In 2008 an important donation was made for the con-

struction of the Universidad Tecnológica de Chalco (Chalco Tech-

Grupo Gigante

24

nology University). Also, scholarships were granted to outstanding

students at the National Conservatory of Music.

Ecology

Aware of the need to protect the environment, Fundación Gigante

conducted several initiatives aimed at attacking the problem of abuse

of our natural resources, inviting all the companies in the Group to

conduct their activities, taking a special concern for the environment.

This year the Annual Reforestation Program took place, with the

reconditioning of tens of hectares of National Parks in the states of

Querétaro and Hidalgo.

In 2008 we reached a record figure of 210 million pesos in aid, channeled through Fundación Gigante, to more than 1.8 million Mexicans. This was a dream come true of which we are proud, but not satisfied. There is always more that can be done.

We are proud of the achievements of the past six years since the

Foundation began and the more than 45 years of serving Mexico.

Actions are what count, so we must always double our efforts and

continue to expand the help in the years to come.

Sincere thanks to all our shareholders, collabora-

tors and friends for making this a reality.

2008 Annual Report

25

Report of the Audit Committee for fiscal year 2008México, D.F., March 23, 2009

To the Board of Directors of Grupo Gigante, S.A.B. de C.V.

Dear Sirs:

As Members and Secretary of the Audit Committee, and in compliance with that established in subsection second of article 42 and in

subsection second of article 43 of the Securities Market Law and the bylaws of Grupo Gigante, S.A.B. de C.V., we submit the following

annual report of this Commitee for fiscal year 2008.

During the fiscal year mentioned, this Committee carried out, among others, the following functions:

I. We have kept in mind the recommendations established in the Code of Best Corporate Practices.

II. We reviewed the status of the internal control and the corporate internal audit system of Grupo Gigante, S.A.B. de C.V. and

subsidiaries, approving its guidelines, discussing and reaching agreements regarding the deviations reported, as well as those aspects

that require improvement, taking into account the opinions and reports from external audit and corporate audit, as well as the

external auditor’s opinion, for which purpose we coordinated the work of both audits, reviewing and authorizing their work programs.

We concluded that, in general, there is an adequate internal control and corporate internal audit system.

III. We did the follow-up on the preventive and corrective measures implemented, based on the results of the investigations and reviews

developed by External Audit and Corporate Audit related with noncompliance of the guidelines and policies of operation and accounting

entries, either of Grupo Gigante, S.A.B. de C.V. or of the subsidiaries that it controls.

IV. We verified observance of the mechanisms established to control risks, contributing in the preparation of the Risk Matrix of Grupo

Gigante and subsidiaries.

V. We evaluated the performance of Galaz, Yamazaki, Ruiz Urquiza, S.C. the firm that conducted the audit of the consolidated financial

statements for the fiscal year ended December 31, 2008, as well as the external auditor in charge, C.P.C. Juan Antonio Rodríguez E.,

concluding that both complied appropriately with their responsibilities in line with generally accepted audit standards in Mexico and

with the applicable resolutions of the Securities Market Law. For this purpose, we met with the External Auditor on February 15 and 19,

August 1 and October 17 of 2008 and February 20, 2009, as well as today in order to analyze and review, among other aspects, their

Annual External Audit Plan, their Executive Summary of observations and recommendations and the draft of the consolidated financial

statements for the fiscal year ended December 31, 2008.

VI. We analyzed the description and valuation of the additional or complementary services provided by Galaz, Yamazaki, Ruiz Urquiza, S.C.

in charge of conducting the external audit. We also reviewed the policies and operations with related parties, concepts that we included

in our quarterly report to the Board of Directors on October 17, 2008, ruling out hiring independent experts for both of these.

VII. We received the written reports and held the interviews and meetings that were considered necessary with the external and

internal lawyers to ensure that Grupo Gigante and its subsidiaries duly comply with the applicable legal provisions, as well as with

the external auditor and internal corporate auditor and the top executives that we considered appropriate for the management of

Grupo Gigante, S.A.B. de C.V. and its subsidiary corporations.

Grupo Gigante

26

VIII. We analyzed the main results based on the reviews of the consolidated financial statements of the corporations that Grupo

Gigante controls, having requested from External Audit the reports at the close of each quarter of 2008, confirming that the

financial information of Grupo Gigante, S.A.B. de C.V. was prepared based on the same standards, criteria and practices of financial

information as the annual reports.

IX. Based on the analysis and discussion of the consolidated quarterly and annual financial statements at December 31, 2008 of

Grupo Gigante, S.A.B. de C.V., which we conducted with the executives responsible for their preparation and review, mainly with

P.A. Federico Coronado B., Corporate Director of Management and Finance as well as with External Auditor, C.P.A. Juan Antonio

Rodríguez Espinola, we recommend that they be approved by the Board of Directors.

X. We analyzed the description and effects of the modifications to the accounting policies approved during the fiscal year covered by

the report, now known as standards of financial information.

XI. We reviewed the content of the report of the Chief Executive Officer of Grupo Gigante, S.A.B. de C.V. referred to in article 28, subsection

IV, paragraph c of the Securities Market Law, supported, among other elements, by the External Auditor’s opinion, with regard to which it is

our opinion that:

1) The accounting and information policies and criteria followed by the aforementioned corporation are appropriate and

sufficient, considering the corresponding particular circumstances.

2) Said policies and criteria were applied consistently in the information presented by the Chief Executive Officer of the

corporation mentioned.

3) As a consequence of the two previous statements, the financial information presented by the Chief Executive Officer reflects

reasonably the financial situation and the consolidated results of the corporation.

XII. We believe that, related with the pertinent observations formulated by shareholders, board members, main administrative officers,

employees and, in general, any third party, regarding the accounting, internal controls and other matters related with corporate

internal or external audit, or derived from any claims made regarding events they considered to be irregularities in management, not

having any point to report on this regard.

XIII. We did the follow-up to the agreements of the General Stockholders’ Meetings and the meetings of the Board of Directors related

with this Committee.

Consequently, with this Report, we hereby comply with the obligation stipulated in the aforementioned articles of the Securities Market

Law and the bylaws of Grupo Gigante, S.A.B. de C.V.

Luis Santana Castillo Luis Rebollar Corona

Chairman of the Committee

Roberto Salvo Horvilleur Ernesto Valenzuela Espinoza

Secretary of the Committee

2008 Annual Report

27

Report of the GovernanceCommittee for fiscal year 2008México, D.F., March 23, 2009

To the Board of Directors

To the General Stockholders’ Meeting of Grupo Gigante S.A.B. de C.V.

Dear Sirs:

As members of the Governance Committee and in compliance with that established in article 43, subsection I and other applicable provi-

sions of the Securities Market Law, and also in compliance with the bylaws of Grupo Gigante, S.A.B. de C.V. and the Regulations of the Board

of Directors, we present the following Report of this Committee for fiscal year 2008.

In compliance with the provisions noted previously, during the fiscal year reported on, this Committee met at 4 ordinary meetings and

2 extraordinary meetings, presenting its corresponding reports and recommendations to the Board of Directors at the Board meetings held

during the year that just concluded, and during which this Committee engaged mainly on the following activities and responsibilities:

I. During the fiscal year considered in this report, the Committee followed up on the various recommendations stemming from the

project called “Corporate Government”, which were implemented throughout 2007 as a consequence of the decisions and resolu-

tions taken by the Board of Directors and the General Stockholders’ Meeting, which, among other issues included the review of the

bodies of corporate governance and their formation, review of the organic structure of the subsidiary named Gigante and that of

the Group, preparation of the Regulations of the Board of Directors, preparation of the Operating Rules of the Committees, etc.,

reporting that throughout the fiscal year considered herein, these measures were applied.

II. An essential part of the work carried out included the review and adjustment of the organic structure of the Group, based on the

consequences resulting from the divestiture of the supermarket business and the reduction in size that this led to, and consequently

the need of strategic redirectioning proposals for Grupo Gigante.

Due to this, and in light of the development of the project called “Model of Organizational Relations and Strategic Alignment”,

an effort coordinated by the Strategic Consulting Committee, and within the framework of our authority, the Committee partici-

pated actively in all matters related with human resources, and in the analysis of the strategic organizational alignment and all its

implications.

Consequently, the Committee had knowledge of, discussed in depth and approved certain adjustments to the recommendations

that were presented to it, both by the external consultants and by management. Development of the first phase was begun and in

accordance with this process, said recommendations will be implemented during the first part of 2009.

III. Another important matter, closely related with the above issue, is the development of the Project called “Comprehensive Compensa-

tion”. Having engaged the support of specialized consultants, and with the support of an internal work group, through this effort an

analysis of the compensations of executives and employees of the Group will be carried out, incorporating benchmarking of internal

and external fairness, in order to have a proposal for the definition of the “Policy of packages of Comprehensive Compensation or

Remuneration for Top Executives of the Corporation”, including that of the Chief Executive Officer, in the terms of the responsibilities

assigned to this Committee by the Securities Market Law and by the Board of Directors. This analysis and proposal will also include

fixed and variable plans for bonuses and incentives, such as the current Stock Plan for Executives , or equivalent plans, all of this with

the strategic objective of attracting and retaining talented people.

Grupo Gigante

28

The final recommendations will be ready toward the end of April of the current fiscal year (2009) and will then be presented to

the Board of Directors for approval, within the framework of its authority, and thereafter their timely execution by management, in

accordance with the Strategic Plan of Grupo Gigante and the respective programs.

IV. Office Depot de México. In accordance with what was announced publicly and, within the scope of its powers, the Committee participat-

ed in the analysis and recommendations regarding the different strategic alternatives and negotiations that were held with our partner.

Just as was reported, and in consideration of the reasons of its U.S. partner, the company withdrew its offer of acquisition and ratified

the basic conditions of its association, strengthening the relationship and making the joint decision to expand its territory toward South

America, beginning with Colombia.

V. Process of divestiture of the subsidiary Radio Shack de México.

In a detailed manner, throughout the year that just ended, the Committee had knowledge of the criteria and fundamentals of this

process, participating, together with the Finance and Planning Committee, and considering its opinions regarding the analysis of the

different strategic alternatives considered, and learned also of the advances of this process.

On the occasion of the extraordinary meeting to which it was called, toward the end of 2008, it finally recommended to the

Board of Directors approval of the transaction, suggesting that this subsidiary be sold in the terms negotiated by management,

considering the price, the conditions and characteristics of the transaction, which, at the appropriate time was publicly disclosed, in

compliance with the corresponding requirement.

VI. Also, and in compliance with the provisions of the Law, the Committee evaluated the performance of the Chief Executive Officer of

the Corporation and its top executives, authorizing bonuses and incentives, especially for their successful participation in the divesti-

ture of the supermarket business and the results of fiscal year 2007.

VII. Within the framework of its authority and responsibility and in accordance with that provided in article 28, subsection III, paragraph b),

of the Securities Market Law, the Committee had knowledge of and analyzed, at two different meetings, certain transactions between

the related parties, always seeking and achieving in these transactions, fair market values, for the benefit of the corporation, and, at the

appropriate time, also recommended approval of the Board of Directors, having nothing more to add.

VIII. Since there were no situations regarding the approvals referred to in article 28, subsection III, paragraph f, there was no need to

present these transactions to the Board of Directors.

Therefore, with this Report, we hereby comply with the provisions of article 43, subsection I and other applicable provisions of the Law.

Roberto Salvo Horvilleur Luis Santana Castillo


Gilberto Perezalonso Cifuentes Sergio Montero Querejeta


2008 Annual Report

29

Report of the Finance and Planning Committee for fiscal year 2008México, D.F., March 23, 2009



Dear Sirs:

As members of the Finance and Planning Committee and in compliance with that established in the bylaws of Grupo Gigante, S.A.B. de

C.V. and in the Regulations of the Board of Directors currently in force, we present the Report of this Committee for fiscal year 2008.

In compliance with the provisions noted, during the fiscal year just ended, this Committee held four ordinary meetings and two ex-

traordinary meetings, and compiled and presented to the Board of Directors at all its meetings during the fiscal year, its respective reports

and recommendations regarding the content and development of the following specific duties and matters:

I. During the fiscal year that just ended, the Committee received detailed and timely information from management regarding the ad-

vances and problems related with financial and strategic matters, pertaining to the faculties and recommendations of this Committee

to the Board of Directors, with special emphasis on the discussion and analysis of the following matters:

I.1. Budget 2008, its advances and adjustments, particularly considering the impact of the divestiture of the supermarket business.

I.2. Cash Flow of the company, with an emphasis on the supervision and advances of the subsidiary Gigante, S.A. de C.V., con-

sidering the transition process that occurred during the first six months of the year, as a result of transferring the stores to

Organización Soriana, and of the extraordinary revenue that was received and its effect on our subsidiary, as well as on the

consolidated income statement of Grupo Gigante.

I.3. Quarterly and annual results of the previous fiscal year for the company, and for the consolidated subsidiaries and affiliates that

it consolidates, for their presentation to the Board of Directors for its consideration.

I.4. Development and advances of the capital expenditures of the company and its subsidiaries.

I.5. Supervision and use of the company’s credit lines.

I.6. Analysis and discussion of different financing sources.

I.7. Analysis and definition of the main premises and aspects of the 2008 budget.

I.8. Conclusion of the process of divestiture of the supermarket business from the standpoint of the Committee’s responsibilities.

I.9. Specific recommendations on the follow-up to the conclusion of the transition and management of the proceeds from the

transaction with Tiendas Soriana, from the standpoint of the Committee’s sphere of competence.

II. During the period covered by this report, and from the standpoint of planning, the Committee had knowledge of the progress regarding

implementation of the Corporate Governance project. Our observations and comments on the progress, recommendations and results

of this project were presented to the Board of Directors at the appropriate time throughout the fiscal year discussed herein.

III. Another fundamental part of the work carried out was the analysis, discussion and recommendations regarding the project called

“Model of Organizational Relations and Strategic Alignment” prepared by the management with the support of external consultants.

This project will be concluded during the first quarter of 2009 and is headed by the Strategic Consulting Committee in the terms

that said Committee will report to the Board of Directors.

IV. Also, during the fiscal year that just ended, the Committee had knowledge and expressed its view points regarding the “Compre-

hensive Compensation” project prepared by management with the support of external consultants. This project will be concluded

Grupo Gigante

30

during the first half of 2009 and is headed by the Governance Committee in the terms that said Committee will report to the Board

of Directors.

V. Process of divestiture of the subsidiary Radio Shack de México.

In a detailed manner, during the year the Committee had knowledge of the criteria and fundamentals of this process, and participated in the

analysis of the different strategic alternatives that were considered, also learning of the advances of the process.

Finally, and on the occasion of the extraordinary meeting held toward the end of 2008, it recommended to the Board of Directors, to

approve the transaction and suggested the sale of this subsidiary under the terms negotiated by management, considering the price and the

terms and characteristics of the transaction, of which public disclosure was made at the appropriate time.

VI. Management of the Treasury and of the surplus resources

The Committee designed and proposed to the Board of Directors alternatives and policy guidelines regarding investments and manage-

ment of the Treasury of the Group, both in the regular operation of the company as well as in terms of the surplus generated due to the

divestiture of the supermarket business, which received approval. Throughout the year 2008, the Committee supervised performance,

receiving reports from management regarding Treasury’s performance, risks and yield, making specific decisions on the matter. As will be

reported in detail in the Annual Report, the Treasury of the company concluded the year with solid cash resources, mostly in pesos and

risk-free, amounting to more than $4,179 million pesos and slightly more than US$12.06 million. It should be mentioned that, throughout

the course of the year that just ended, the yield received in pesos was higher than the average Cetes rate. Finally, the Committee received

periodic reports on compliance with the policy regarding repurchase of its own shares and their performance.

With this report we hereby comply with the provisions of the bylaws and other applicable provisions of the Regulations of the Board

of Directors.

Javier Molinar Horcasitas Ángel Losada Moreno


José Aguilera Medrano Sergio Montero Querejeta


2008 Annual Report

31

Report of the Strategic Consulting Committee for fiscal year 2008México, D.F., March 23, 2009



Dear Sirs:

As members of the Strategic Consulting Committee, and in compliance with that established in the bylaws of Grupo Gigante S.A.B. de C.V.

and in the Regulations of the Board of Directors currently in force, and pursuant to the resolution of the Board regarding the formation

of this Committee and its specific duty, we present the following Report of activities and results for fiscal year 2008.

During the fiscal year that just ended, this Committee held three ordinary meetings and one extraordinary meeting, the latter abroad,

having prepared and presented to the Board of Directors, at its meetings during fiscal year 2008, its reports and recommendations regard-

ing the content, development and advances of the following antecedents and specific matters:

I. At the beginning of the fiscal year that just ended, the Committee was formally created, with its formation confirmed at the Grupo

Gigante stockholders’ meeting of April 2008, and the Board of Directors instructing the Committee to conduct a detailed analysis

of the current situation, resources and position of the Group following the divestiture of its supermarket business, with the aim of

readjusting the strategic direction of the company and its subsidiaries and affiliates.

II. Under this premise, the Committee began its work, supported by a group of top executives of the corporation, and began the task

of defining a program and framework of action that would allow complying with the assignment of strategic redirectioning, with the

decision to divide the analysis to be carried out in two main areas. On the one hand, to review and if pertinent, redefine the Business

Plans of the operating subsidiaries, also considering the adjustment and the necessary organizational redirectioning of the Group, and

on the other hand, to identify strategic opportunities that would allow, if applicable, the development of new formats or businesses

to be undertaken by the company.

III. To this end, the services of prominent external consultants were engaged. One was concentrated on providing support of the review

of the Business Plans of the operating subsidiaries and the analysis of the strategic organizational alignment, called “Model of Organi-

zational Relations and Strategic Alignment”, and another focused on identifying strategic opportunities for the development of new

businesses or formats, under a plan called “New Corporate Strategies”.

IV. Strategic Plan of Grupo Gigante for the 2009–2013 period. The committee received the conclusions and recommendations of both

consultants and projects and conducted a careful and detailed review of these.

The current situation, and particularly the economic and financial crisis that began in the second half of the year that just ended,

made it necessary to reconsider certain premises and conclusions on two occasions during the year, particularly with regard to the

market of potential consumers and the global and local fundamental economic and financial variables regarding the premises and

projections prepared both for the Business Plans of the operating subsidiaries and affiliates, as well as for potential new businesses

and strategic opportunities.

Finally, in close collaboration with management, the different premises and projections have been adjusted with the aim of rede-

fining the different plans, in order to design the Grupo Gigante Strategic Plan for 2009–2013, which is largely completed and will be

ready for presentation to the Board of Directors during the first quarter of this year.

Grupo Gigante

32

2008 Annual Report

33

Until this occurs, and as mentioned above, considerable progress has been made in the proposed document regarding the definition

of key factors such as vision, mission, values and principles of action for the Group, with a view to its strategic redirection.

V. Another fundamental part of the work carried out is the analysis, discussion and recommendations regarding the project called

“Comprehensive Compensation”, prepared by management with the support of external consultants.

This project, which will be concluded during the first half of 2009 and is directed by the Governance Committee, in the terms

that said Committee will report to the Board of Directors, will be aligned with the general strategic considerations that the Strate-

gic Plan of the Group assumes, particularly including that referring to the organizational alignment and development of the human

resources of Grupo Gigante.

Therefore, with this report, we hereby comply with the obligation stipulated in the bylaws and other applicable provisions of the Regula-

tions of the Board of Directors, as well as the assignment received by this Committe.

Ángel Losada Moreno José Aguilera Medrano


Armando Garza Sada Javier Molinar Horcasitas

Gilberto Perezalonso Cifuentes Sergio Montero Querejeta


Equity board members Ángel LosadaChairman of the Board of Directors and

Chief Executive Officer of Grupo Gigante

BS in Business Administration, Universidad Anáhuac

Braulio ArsuagaAssociate Director, Hoteles Presidente

BS in Business Administration, Universidad Anáhuac

MS in Business Administration, Southern Methodist University

Gonzalo Barrutieta Chairman of the Board, Operadora IPC de México

BS in Economics, ITAM

MS in Business Administration, Claremont Graduate University

Related board membersJuan Carlos Alverde Operations Director, Restaurantes Toks

BS in Communications, Universidad Anáhuac

MS in Marketing, North Western University

Independent board members Roberto Salvo Horvilleur Investor in several Nicaraguan companies

Independent board member in several companies

BS in Business Administration, University of Notre Dame

MS in Business Administration, INCAE, Nicaragua

José Aguilera Independent board member in several companies

BS in Public Accountancy, Escuela Bancaria y Comercial

Javier MolinarChief Executive Officer, Ixe Banco

BS in Business Administration, Universidad la Salle

Gilberto Perezalonso Independent board member in several companies

BS in Legal Studies, Universidad Iberoamericana

BS in Business Administration, INCAE, Nicaragua

Corporate Finance Program, Harvard University

Board of Directors & Committees

Luis Rebollar Corona Independent board member in several companies

BS in Chemical Engineering, UNAM

Luis SantanaIndependent board member in several companies

BS in Philosophy, Pontifical Gregorian University, Rome, Italy

MS in Administration, IPADE, Mexico

Non Independent board membersArmando Garza SadaDevelopment Director, Alfa Corporativo

BS in Engineering, MIT

MS in Business administration, Stanford University

Audit CommitteeLuis Santana Chairman

Roberto SalvoLuis Rebollar

Governance CommitteeRoberto Salvo Chairman

Gilberto PerezalonsoLuis Santana

Finance and Planning CommitteeJavier Molinar Horcasitas Chairman

Ángel LosadaJosé Aguilera

Strategic Consulting CommitteeÁngel Losada José Aguilera Armando Garza Javier Molinar Gilberto Perezalonso

Grupo Gigante

34

2008 Annual Report

35

Independent Auditors’ Report to the Board of Directors

and Stockholders of Grupo Gigante, S. A. B. de C. V.

We have audited the accompanying consolidated balance sheets of Grupo Gigante, S. A. B. de C. V. and Subsidiaries (the “Com-

pany”) as of December 31, 2008 and 2007, and the related consolidated statements of income and changes in stockholders’ equity

for the years then ended, of cash flows for the year ended, December 31, 2008 and of changes in financial position for the year

ended December 31, 2007. These financial statements are the responsibility of the Company’s management. Our responsibility is

to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Mexico. Those standards require that we

plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstate-

ment and that they are prepared in accordance with Mexican Financial Reporting Standards. An audit includes examining, on a test

basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the financial

reporting standards used and significant estimates made by management, as well as evaluating the overall financial statement pre-

sentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 18 to the consolidated financial statements, the accompanying 2007 financial statements have been retro-

spectively adjusted for discontinued operations.

As mentioned in Note 3a, beginning January 1, 2008 the Company adopted the following financial reporting standards: NIF B-2,

Statement of Cash Flows; NIF B-10, Effects of Inflation; NIF B-15, Foreign Currency Translation; NIF D-3, Employee Benefits, and

NIF D-4, Income Taxes.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Grupo Gigante,

S. A. B. de C. V. and Subsidiaries as of December 31, 2008 and 2007, and the results of their operations and changes in their

stockholders’ equity for the years then ended, their cash flows for the year ended December 31, 2008 and changes in their financial

position for the year ended December 31, 2007, in conformity with Mexican Financial Reporting Standards.

The accompanying financial statements have been translated into English for the convenience of readers in the United States of

America.

Galaz, Yamazaki, Ruiz Urquiza, S. C.

Member of Deloitte Touche Tohmatsu

C. P. C. Juan Antonio Rodríguez EspínolaFebruary 27, 2009(March 27, 2009 with respect to Note 25)

Galaz, Yamazaki,

Ruiz Urquiza, S.C.

Paseo de la Reforma 505 Piso 28

Colonia Cuauhtémoc

06500 México, D.F.

Tel: + 52 (55) 5080 6000

Fax: + 52 (55) 5080 6001

www.deloitte.com.mx

Grupo Gigante

36

Grupo Gigante, S. A. B. de C. V. and Subsidiaries

Consolidated balance sheetsAs of December 31, 2008 and 2007(In thousands of Mexican pesos)

See accompanying notes to consolidated financial statements.

Assets 2008 2007 Current assets: Cash and cash equivalents $ 4,755,312 $ 535,491 Accounts receivable – Net 755,641 7,817,092 Inventories – Net 1,246,430 979,313 Prepaid expenses 115,798 60,797 Discontinued operations 8,455 7,002,957 Total current assets 6,881,636 16,395,650 Property and equipment – Net 13,757,057 12,883,652 Investment in shares 211,179 220,473 Goodwill and other assets – Net 493,210 508,091 Discontinued operations 18,584 192,467 Total $ 21,361,666 $ 30,200,333 Liabilities and stockholders’ equity Current liabilities: Current portion of long-term debt $ $ 14,000 Trade accounts and notes payable 1,015,851 809,182 Accrued expenses and taxes 975,108 2,057,709 Discontinued operations 25,950 6,008,782 Total current liabilities 2,016,909 8,889,673 Long-term debt 39,000 Employee retirement obligations 33,869 45,546 Deferred income taxes and statutory employee profit sharing 1,997,903 2,227,380 Discontinued operations 559,868 Total liabilities 4,048,681 11,761,467 Stockholders’ equity: Common stock 2,689,334 2,689,090 Additional paid-in capital 7,671,526 7,648,149 Retained earnings 6,963,524 22,476,480 Insufficiency in restated stockholders’ equity (13,188,431) Cumulative initial effect of deferred income taxes (1,312,925) Cumulative translation effects of foreign subsidiaries (11,399) Majority stockholders’ equity 17,312,985 18,312,363 Minority stockholders’ equity 126,503 Total stockholders’ equity 17,312,985 18,438,866 Total $ 21,361,666 $ 30,200,333

2008 Annual Report

37


Consolidated statements of incomeFor the years ended December 31, 2008 and 2007 (In thousands of Mexican pesos)

2008 2007

Revenues: Net sales $ 7,620,548 $ 6,608,621 Other 764,947 225,532 8,385,495 6,834,153 Costs and expenses: Cost of sales 4,759,976 4,154,352 Operating expenses 2,610,197 2,128,143 7,370,173 6,282,495 Other expense (income) – Net 16,175 (23,202) Net comprehensive financing cost: Interest expense 105,594 88,090 Interest income (288,825) (29,242) Exchange loss 329,703 2,834 Monetary position gain (7,235) (8,687) Others financing income (47,228) (37,479) 92,009 15,516 Non-ordinary item (9,395) (49,038) Income from continuing operations before income taxes 916,533 608,382 Income tax expense (benefit) (113,357) 143,395 Income from continuing operations 1,029,890 464,987 Income from discontinued operations 1,780,756 4,264,724 Consolidated net income $ 2,810,646 $ 4,729,711

Net income of majority stockholders $ 2,810,646 $ 4,712,476 Net income of minority stockholders 17,235

Consolidated net income $ 2,810,646 $ 4,729,711

Basic earnings per common share $ 2.84 $ 4.78 Diluted earnings per share $ 2.82 $ 4.73


Grupo Gigante

38

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2008 Annual Report

39


Consolidated statement of cash flowsFor the year ended December 31, 2008 (In thousands of Mexican pesos)


Operating activities: Consolidated net income $ 2,810,646 Items related to investing activities: Depreciation and amortization 298,627 Gain on sale of fixed assets (1,208,640) Gain on sale of discontinued operation (1,854,682) Gain on sale of shares in consolidated subsidiaries (436,768) Items related to financing activities: Interest expense – Net 13,954 (376,863) (Increase) decrease in: Accounts receivable – Net 6,579,995 Inventories – Net (296,597) Other assets 122,772 Decrease in: Trade accounts and notes payable (3,130,468) Accrued expenses (1,624,335) Income taxes paid (762,002) Net cash provided by operating activities 512,502 Investing activities: Purchases of property and equipment (1,300,748) Proceeds from sale of property and equipment 764,275 Proceeds from sale of shares in consolidated subsidiaries 563,334 Proceeds from sale of discontinued operation 7,846,056 Proceeds from disposal of investments permanently 9,004 Dividends received 27,066 Interest received 12,111 Net cash provided by investing activities 7,921,098 Excess cash to apply to financing activities 8,433,600 Financing activities: Repayment of loans received (774,992) Repurchases of shares 13,251 Interest paid (22,496) Dividends paid (3,835,872) Net cash used in financing activities (4,620,109) Net increase in cash and cash equivalents 3,813,491 Adjustment to cash flows due to exchange rate fluctuations (6,948) Cash and cash equivalents at beginning of year from continuing operations 535,491Cash and cash equivalents at beginning of year from discontinued operations 512,610Cash and cash equivalents from discontinued operations (99,332) Cash and cash equivalents at end of year $ 4,755,312

Grupo Gigante

40


Consolidated statement of changes in financial positionFor the year ended December 31, 2007 (In thousands of Mexican pesos)

Operating activities: Consolidated net income $ 4,729,711 Items that did not require (generate) resources: Depreciation and amortization 852,341 Gain on sale of property and equipment (1,148) Loss on disposals of property and equipment 2,276,043 Employee retirement obligations 32,884 Derivative financial instruments 18,898 Deferred income taxes and statutory employee profit sharing 1,678,163 9,586,892 Changes in operating assets and liabilities: Accounts receivable – Net (6,932,711) Inventories – Net (57,233) Prepaid expenses (33,112) Trade accounts and notes payable (831,044) Due to related parties 43,145 Employee retirement obligations (34,958) Accrued expenses and taxes 1,976,767 Net resources generated by operating activities 3,717,746 Financing activities: Notes payables to financial institutions 426,321 Repayment of long-term debt (2,750,344) Sale of treasury shares – Net 170,104 Net resources used in financing activities (2,153,919) Investing activities: Acquisition of property and equipment (1,620,001) Proceeds from sale of property and equipment 57,968 Goodwill and other assets – Net 114,363 Net resources used in investing activities (1,447,670) Cash and cash equivalents: Net increase 116,157 Balance at beginning of year 931,944 From discontinued operations (512,610) Balance at end of year from continuing operations $ 535,491


2008 Annual Report

41


Notes to consolidated financial statementsFor the years ended December 31, 2008 and 2007(In thousands of Mexican pesos)

1. Nature of business

Grupo Gigante, S. A. B. de C. V. and Subsidiaries (the “Company”) are engaged in restaurant operations, real state companies

and self-service stores that sell office supplies and electronic goods, perishables and general merchandise.

As mentioned in note 18a, on December 15, 2008, the Company concluded its strategic business relationship with Tandy

International Corporation when the stockholders approved the disposal of all shares of Radio Shack, S. A. de C. V. and its

administrative service companies Retail Answers, S. A. de C. V. and Logistic Answers, S. A. de C. V. As also mentioned in note

18b, on December 24, 2007, at the General Ordinary Stockholders’ Meeting, the stockholders approved the disposal of the

Company’s supermarket business.

2. Basis of presentation

Explanation for translation into English - The accompanying consolidated financial statements have been translated from Spanish

into English for use outside of Mexico. These consolidated financial statements are presented on the basis of Mexican Financial

Reporting Standards (“MFRS”), individually referred to as Normas de Informacion Financiera (“NIFs”). Certain accounting

practices applied by the Company that conform with MFRS may not conform with accounting principles generally accepted

in the country of use.

a. Monetaryunitofthefinancialstatements-The financial statements and notes as of December 31, 2008 include balances

and transactions denominated in Mexican pesos of different purchasing power, while those as of and for the year ended

December 31, 2007 are presented in Mexican pesos of purchasing power of December 31, 2007.

b. Consolidationoffinancialstatements- The consolidated financial statements include those of Grupo Gigante, S. A. B. de

C. V. and its subsidiaries, whose shareholding percentage in their capital stock is shown below. The financial statements

of Office Depot de México, S. A. de C. V. and through 2006, PSMT México, S. A. de C. V., are consolidated using the

proportionate consolidation method, based on the Company’s 50% ownership interest in such entities resulting in joint

control. As mentioned in Note 16, on October 31, 2007, the Company acquired from PriceSmart, Inc., the remaining 50%

of shares of its subsidiary PSMT México, S. A. de C. V., which it did not own previously; therefore, beginning on such date

the financial statements of such subsidiary are consolidated on a 100% basis.

Gigante, S. A. de C. V. and

Subsidiaries

14 real estate companies in where it has located some stores that

are rented to third party. As mentioned in Note 18b on Decem-

ber 24, 2007, at the General Ordinary Stockholders’ Meeting, the

stockholders approved the disposal of the Company’s supermar-

ket business.

100.00%

Company or Group Equity Activity

Grupo Gigante

42

171 office supply stores in Mexico (including two Distribution Cen-

ters that also sell merchandise), 4 in Costa Rica, 5 in Guatemala, 3 in El

Salvador, 2 in Honduras, 4 in Panama (including one Distribution Cen-

ter that also sell merchandise) and 1 Distribution Center in Mexico.

It operated 2 club price stores in Guanajuato, Mexico and 1 in

Queretaro, Mexico.

7 self-service stores operated on the Latin market in Los Angeles,

California. As mentioned in note 18b on December 24, 2007, at

the General Ordinary Stockholders’ Meeting, the stockholders’

approved the disposal of the Company’s supermarket business.

A chain of 85 restaurants.

126 self-service stores that sell groceries.

The Company had 200 stores that sell electronic goods. As men-

tioned in note 18a on December 15, 2008, the stockholders ap-

proved the disposal of all shares of the Company.

40 real estate companies that own land where Company’s stores

that are rented to third party and restaurants are located.

A real estate company that owns land where 2 of the Company’s

stores that are rented to third party, as well as the use and control

of trademarks.

Provides administrative services to the Company.





Processes and manages electronic cash transfers in Mexico.

Sales, administration and operation of commercial business re-

lated to packaging food.

Office Depot de México,

S. A. de C. V. and Subsidiaries

PSMT México, S. A. de C. V. and

Subsidiaries

Gigante Holdings International, Inc.

and Subsidiaries

Restaurantes Toks, S. A. de C. V.

Tiendas Super Precio, S. A. de C. V.

Radio Shack de México, S. A. de C. V.

Controtiendas, S. A. de C. V.

Gigante Fleming, S. A. de C. V.

Servicios Gigante, S. A. de C. V.

Servicios Toks, S. A. de C. V.

Operadora Gigante, S. A. de C. V.

Servicios Gastronómicos Gigante,

S. A. de C. V.

Servicios Operativos Gigante,

S. A. de C. V.

Pagos en Línea, S. A. de C. V.

Procesadora Gigante, S. A. de C. V.

50.00%

100.00%

100.00%

100.00%

100.00%

50.01%

100.00%

100.00%

99.99%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%


2008 Annual Report

43

Significant intercompany balances and transactions have been eliminated in these consolidated financial statements.

Purchase-sale, manufacture and commercialization of merchan-

dise.

Provided administrative services. As mentioned in note 18a, on

December 15, 2008, the stockholders approved the disposal of

all shares of the Company.

Provided administrative services. As mentioned in note 18a, on

December 15, 2008, the stockholders approved the disposal of

all shares of the Company.

Manages the use and control of trademarks.

A real estate company.


A real estate company. On November 30, 2008, the stockholders

approved the disposal of all shares.


2 self service store that sell home items.


100.00%

50.20%

50.20%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

100.00%

Importadora Corporativa del Centro,

S. A. de C. V.

Retail Answers, S. A. de C. V.

Logistic Answers, S. A. de C. V.

Franquicias Super Precio, S. A. de C. V.

Inmobiliaria Toks, S. A. de C. V.

Controinmuebles, S. A. de C. V.

Grupo Controinmuebles,

S. A. de C. V.

Controladora Controinmuebles,

S. A. de C. V.

Distribuidora Storehome,

S. A. de C. V.

Servicios Storehome, S. A.de C. V.


c. Translationoffinancialstatementsofforeignsubsidiaries- To consolidate the financial statements of foreign subsidiaries, the

accounting policies of the foreign entity are converted to MFRS using the currency in which transactions are recorded except

for the application of NIF B-10 when the foreign entity operates in an inflationary environment, since this NIF applies to

financial statements that have been remeasured to the functional currency. The financial statements are subsequently trans-

lated to Mexican pesos considering the following methodology:

In 2008, foreign operations whose functional currency is the same as the currency in which transactions are recorded trans-

late their financial statements using the following exchange rates: 1) the closing exchange rate in effect at the balance sheet

day for assets and liabilities; 2) historical exchange rates for stockholders’ equity, revenues, costs and expenses. Through

2007, the financial statements of foreign subsidiaries that operated independently of the Company in terms of finances and

operations recognized the effects of inflation of the country in which they operate and were then translated to Mexican

pesos using the closing exchange rate in effect at the balance sheet date. In both 2008 and 2007, translation effects are

recorded in stockholders’ equity.

Grupo Gigante

44

d. Comprehensiveincome- Represents changes in stockholders’ equity during the year, for concepts other than distributions and

activity in contributed common stock, and is comprised of the net income of the year, plus other comprehensive income

items of the same period, which are presented directly in stockholders’ equity without affecting the consolidated statements

of income. In 2008, other comprehensive income is represented by the translation effects of foreign subsidiaries, and in 2007

by the effects of translation of foreign subsidiary and the insufficiency of restated stockholders’ equity.

e. Classificationofcostsandexpenses-Costs and expenses presented in the consolidated statements of income were classified

according to their function because this is the practice of the industry to which the Company belongs.

f. Financialstatementrestatement-As mentioned in note 18a, on December 15, 2008, the Company concluded its strategic busi-

ness relationship with Tandy International Corporation in where the stockholders approved the disposal of all shares of Radio

Shack de México, S. A. de C. V. and its administrative service companies Retail Answers, S. A. de C. V. and Logistic Answers,

S. A. de C. V. In accordance with Bulletin C-15, “Impairment in the value of long-lived assets and their disposal”, the disposal

of subsidiaries qualifies as discontinuation of an operation.

As mentioned in note 18b, on December 24, 2007, at an Ordinary Stockholders’ Meeting, the stockholders approved the dis-

posal of the Company’s supermarket operations. Therefore, the Company’s supermarket business is considered a discontinued

operation in accordance with Bulletin C-15.

The accompanying 2008 and 2007 consolidated balance sheets, consolidated statements of income and related notes have

been retrospectively adjusted in accordance with Bulletin C-15. Based on NIF B-2, the cash flow statement does not present

the discontinued operation separately except for the discontinued business sale, which is included in investing activities.

g. Saleofsubsidiaries- As mentioned in note 18a, on December 15, 2008, the Company sold its subsidiaries Radio Shack de

México, S. A. de C. V., Retail Answers, S. A. de C. V. and Logistic Answers, S. A. de C. V. Therefore, as of that date, the sub-

sidiaries’ financial statements are no longer consolidated with those of the Company. Condensed financial information as of

the date of sale, and December 31, 2007, and for the eleven and a half and twelve-month periods ended December 15, 2008

and December 31, 2007, respectively, is presented below:

December 15, December 31,

2008 2007 Balance sheets: Current assets $ 558,895 $ 544,238 Fixed assets 201,707 182,762 Current liabilities 492,218 473,934 Stockholders’ equity $ 268,384 $ 253,066

Statement of income: Revenues $ 1,217,872 $ 1,142,102 Costs and expenses (1,114,018) (1,047,654) Other expense – Net (56,706) (36,721) Expense tax (37,578) (23,258) Net income $ 9,570 $ 34,469

2008 Annual Report

45

3. Summaryofsignificantaccountingpolicies

The accompanying consolidated financial statements have been prepared in conformity with MFRS, which require that man-

agement make certain estimates and use certain assumptions that affect the amounts reported in the financial statements

and their related disclosures; however, actual results may differ from such estimates. The Company’s management, upon ap-

plying professional judgment, considers that estimates made and assumptions used were adequate under the circumstances.

The significant accounting policies of the Company are as follows:

a. Accountingchanges:

Beginning January 1, 2008, the Company adopted the following new NIF’s mentioned below.

• NIFB-2,Statementofcashflows(NIFB-2)- Supersedes Bulletin B-12, Statement of Changes in Financial Position, and

replaces the statement of changes in financial position. NIF B-2 permits the presentation of such statement using

either the direct or the indirect method; the Company elected the indirect method. The statement of cash flows

is presented in nominal pesos. According to NIF B-2, this accounting change should be recognized prospectively;

consequently, the Company presents a statement of cash flows for 2008 and a statement of changes in financial

position for 2007.

• NIFB-10,Effectsof inflation (NIFB-10) - Considers two economic environments: a) an inflationary environment,

where cumulative inflation over a three-year period is 26% or more, in which case, the effects of inflation need to be

recognized, and b) a non-inflationary environment, where inflation is less than 26% in the same period, in which case,

the effects of inflation may not be recognized in the financial statements and requires that the loss from monetary

position in equity and the cumulative gain from holding non-monetary assets be reclassified to retained earnings,

except for the gain from holding non-monetary assets that is identified with inventories or fixed assets that have not

been realized as of the effective date of this standard. Such amounts should be maintained in stockholders’ equity

and realized within current earnings of the period in which such assets are depreciated or sold.

Since cumulative inflation over the three preceding years is 11.56%, the environment in which the Company operates

is not inflationary, and beginning January 1, 2008 the Company discontinued recognition of the effects of inflation

in its financial statements and those of its foreign subsidiaries operating in noninflationary economic environments.

However, assets, liabilities and stockholders’ equity at December 31, 2008 and 2007 include restatement effects

recognized through December 31, 2007.

• NIFB-15, Foreign currency translation (NIFB-15) -Eliminates the classification of foreign operations as integrated

foreign operations and autonomous foreign entities and instead establishes the concepts of recording currency, func-

tional currency and reporting currency. NIF B-15 establishes the procedures to translate the financial information of

a foreign operation: i) from the recording currency to the functional currency; and, ii) from the functional currency

to the reporting currency. NIF B-15 also allows an entity to present its financial statements in a reporting currency

that is different from its functional currency.

• NIFD-3,Employeebenefits(NIFD-3)- Incorporates current and deferred statutory employee profit sharing (PTU)

as part of its provisions and establishes that deferred PTU must be determined using the asset and liability method

established in NIF D-4, Income taxes, instead of only considering temporary differences that arise in the reconciliation

between the accounting result and income for PTU purposes.

Grupo Gigante

46

NIF D-3 also eliminates recognition of the additional liability because its determination does not incorporate a salary

increase. NIF D-3 incorporates the career salary concept in the actuarial calculation and limits the amortization period

of the following items to the lesser of five years or the employee’s remaining labor life:

- The beginning balance of the transition liability for termination benefits and retirement benefits.

- The beginning balance of past services and modifications to the plan.

- The beginning balance of actuarial gains and losses from retirement benefits is amortized in 5 years (net of

the transition liability), with the option to fully amortize it against current earnings of 2008, under other

income and expense. The Company amortizes actuarial gains and losses. The Company chose to recognize

actuarial gains and losses directly against results of 2008.

• NIFD-4,Incometaxes(NIFD-4)) - Eliminates the permanent difference concept; clarifies and incorporates certain

definitions, and requires that the balance of the initial cumulative effect of deferred income taxes be reclassified to

retained earnings unless it is identified with any of the other comprehensive income or loss items pending to be ap-

plied against current earnings.

b. Recognitionoftheeffectsofinflation- As mentioned in a., above, beginning January 1, 2008, the Company discontinued rec-

ognition of the effects of inflation except in the foreign subsidiary which operates in an inflationary environment. Through

December 31, 2007 for all entities and in 2008 only for the foreign subsidiary operating in an inflationary environment, such

recognition resulted mainly in inflationary gains or losses on non-monetary and monetary items that are presented in the

financial statements under the two following captions:

Insufficiencyinrestatedstockholders’equity- Represents the accumulated monetary position result through the initial

restatement of the consolidated financial statements and the loss from holding nonmonetary assets which results

from restating certain nonmonetary assets below inflation.

Monetary position result - Monetary position result, which represents the erosion of purchasing power of monetary

items caused by inflation, which is calculated by applying National Consumer Price Index (“NCPI”) factors to monthly

net monetary position. Gains result from maintaining a net monetary liability position.

Inflation rates in Mexico for the years ended December 31, 2008 and 2007 were 6.53% and 3.76%, respectively.

c. Cashandcashequivalents- This line item consists mainly of bank deposits in checking accounts and short time invest-

ments, highly liquid and easily convertible into cash, which are subject to significant value change risks. This line item is

stated at nominal value plus accrued yields, which are recognized in results as they accrue; any fluctuations in value are

recognized in net comprehensive financing cost of the period.

d. Investmentsinsecurities- According to its intent, from the date of acquisition the Company classifies investments in debt and

equity securities in one of the following categories: (1) trading, when the Company intends to trade debt and equity instru-

ments in the short-term, prior to maturity, if any, and are stated at fair value. Any value fluctuations are recognized within

current earnings; (2) held-to-maturity, when the Company intends to, and is financially capable of, holding such investments

until maturity. These investments are recognized and maintained at amortized cost; and (3) available-for-sale. These invest-

ments include those that are classified neither as trading nor held-to-maturity. These investments are stated at fair value; any

unrealized gains or losses resulting from valuation, net of income tax, are recorded as a component of other comprehensive

income within stockholders’ equity, and reclassified to current earnings upon their sale. In 2007, for all entities and in 2008

2008 Annual Report

47

only for the foreign subsidiary operating in an inflationary environment the effect from monetary position of recognized

assets related to investments was recorded as a component of other comprehensive income. Fair value is determined

using prices quoted on recognized markets. If such securities are not traded, fair value is determined by applying recog-

nized technical valuation models.

Investments in securities classified as held-to-maturity and available-for-sale are subject to impairment tests. If there is

evidence that the reduction in fair value is other than temporary, the impairment is recognized in current earnings.

e. Inventoriesandcostofsales- Beginning in 2008, inventories are stated at the lower of cost or realizable value. Through

December 31, 2007 for all entities and in 2008 only for the foreign subsidiary operating in an inflationary environment

inventories were valued at the lower of replacement cost or realizable value. Cost of sales was restated for the effects

of inflation using the last-in, first-out method.

f. Long-livedassetsavailable-for-sale- Long-lived assets available-for-sale are stated at the lower of their net realizable

value or their net carrying value. Net carrying value is comprised of initial acquisition cost plus restatement effects

for the effects of inflation of balances arising from acquisitions made through December 31, 2007 for all entities and

in 2008 only for the foreign subsidiary operating in an inflationary environment using factors derived from the NCPI,

less accumulated depreciation.

g. Derivativefinancialinstruments- Through December 31, 2007, the Company obtained financing under different condi-

tions. If the rate was variable, interest rate swaps were entered into to reduce exposure to the risk of rate volatility, thus

converting the interest payment profile from variable to fixed. These instruments were negotiated only with institutions

of recognized financial strength and when trading limits have been established for each institution.

The Company recognizeed all assets or liabilities that arise from transactions with derivative financial instruments at fair

value in the balance sheet, regardless of its intent for holding them. Fair value was determined using prices quoted on

recognized markets. If such instruments were not traded, fair value is determined by applying recognized valuation tech-

niques. The Company’s policy was not to carry out transactions with derivative financial instruments for the purpose of

speculation.

When derivatives were entered into to hedge risks, and such derivatives met all hedging requirements, their designation

was documented at the beginning of the hedging transaction, describing the transaction’s objective, characteristics, ac-

counting treatment and how the effectiveness of the instrument was measured.

Changes in the fair value of derivative instruments designated as hedges were recognized as follows: 1) for fair value

hedges, changes in both the derivative instrument and the hedged item were stated at fair value and recognized in cur-

rent earnings; 2) for cash flow hedges, changes in the effective portion were temporarily recognized as a component

of other comprehensive income in stockholders’ equity and then reclassified to current earnings when affected by the

hedged item; the ineffective portion of the change in fair value was immediately recognized in current earnings; 3) for

hedges of an investment in a foreign subsidiary, the ineffective portion was recognized as a component of other com-

prehensive income as part of the cumulative translation adjustment. The ineffective portion of the gain or loss on the

hedging instrument was recognized in current earnings, if it was a derivative financial instrument. If not, it was recognized

as a component of other comprehensive income until the investment was sold or transferred.

Grupo Gigante

48

The Company discontinued hedge accounting when the derivative instrument matures, was sold, cancelled or exercised,

when the derivative instrument did not reach a high percentage of effectiveness to compensate for changes in fair value

or cash flows of the hedged item, or when the entity decides to cancel its designation as a hedge.

For cash flow hedges, upon discontinuing hedge accounting, the amounts recorded in stockholders’ equity as a compo-

nent of other comprehensive income remain there until the time when the effects of the forecasted transaction or firm

commitment affect current earnings. If it is not likely that the firm commitment or forecasted transaction will occur, the

gains or losses that accumulated in other comprehensive income are immediately recognized in current earnings. When

the hedge of a forecasted transaction has proven satisfactory, but subsequently the hedge fails the effectiveness test, the

cumulative effects recorded within other comprehensive income in stockholders’ equity are proportionately recorded in

current earnings, to the extent that the forecasted asset or liability affects current earnings.

While certain derivative financial instruments were contracted for hedging from an economic point of view, they were

not designated as hedges because they did not meet all of the requirements and were instead classified as trading for

accounting purposes. Changes in fair value were recognized in current earnings as a component of comprehensive

financing cost.

h. Propertyandequipment- Property and equipment are recorded at acquisition cost. Balances using from domestic ac-

quisition made through December 31, 2007 for all entities and in 2008 only for the foreign subsidiary operating in an

inflationary environment were restated for the effects of inflation by applying factors derived from the NCPI through that

date. Depreciation is calculated using the straight-line method based on the useful lives of the related assets, as follows:

Comprehensive financing cost incurred during the period of construction and installation of qualifying property and

equipment is capitalized and was restarted for inflation through December 31, 2007 using the NCPI.

i. Impairmentoflong-livedassetsinuse-The Company reviews the carrying amounts of long-lived assets in use when an

impairment indicator suggests that such amounts might not be recoverable, considering the greater of the present value

of future net cash flows or the net sales price upon disposal. Impairment is recorded when the carrying amounts exceed

the greater of the aforementioned amounts. Impairment indicators considered for these purposes are, among others,

operating losses or negative cash flows in the period if they are combined with a history or projection of losses, deprecia-

tion and amortization charged to results, which in percentage terms in relation to revenues are substantially higher than

that of previous years, obsolescence, competition and other legal and economic factors.

Total years Total years

2008 2007

Buildings 49 49 Buildings on leased property 31 32 Store equipment 9 10 Furniture and equipment 10 8 Vehicles 4 4

2008 Annual Report

49

j. Goodwill- Goodwill represents the excess of cost over the fair value of subsidiary shares, as of the date of acquisition.

Through December 31, 2007 for all entities and in 2008 only for the foreign subsidiary operating in an inflationary

environment it was restated using the effects of inflation using the NCPI and at least once a year is subject to impair-

ment tests.

k. Directemployeebenefits- Direct employee benefits are calculated based on the services rendered by employees, con-

sidering their most recent salaries. The liability is recognized as it accrues. These benefits include mainly PTU payable,

compensated absences, such as vacation and vacation premiums, and incentives.

l. Employeebenefitsfromtermination,retirementandother-Liabilities from seniority premiums, pension plans and severance

payments are recognized as they accrue and are calculated by independent actuaries using nominal interest rates in 2008

and real interest rates in 2007.

m. Deferredcharges-Costs incurred in the development phase that meet certain requirements and that the Company has

determined will have future economic benefits are capitalized and amortized asked on the straight-line-method over.

Disbursements that do not meet such requirements, as well as research cost, are recorded in results of the period in

which they are incurred.

n. Provisions-Provisions are recognized for current obligations that result from a past event that are probable to result in

the future use of economic resources, and that can be reasonably estimated.

o. Statutoryemployeeprofitsharing(“PTU”)-PTU is recorded in the results of the year in which it is incurred and presented

under other income and expenses in the accompanying consolidated statements of income. Deferred PTU is derived

from temporary differences that in 2008 resulted from comparing the accounting and tax basis of assets and liabilities

and, in 2007, resulted from comparing the accounting result and income for PTU purpose. Deferred PTU is recognized

only when it can be reasonably assumed that such difference will generate a liability or benefit, and there is no indication

that circumstances will change in such a way that the liabilities will not be paid or benefits will not be realized.

p. Incometaxes-Income taxes, calculated as the higher of regular income tax (“ISR”) or the Business Flat Tax (“IETU”), are

recorded in the results of the year they are incurred. To recognize deferred income taxes, based on its financial projec-

tions, the Company determines whether it expects to incur ISR or IETU and accordingly recognizes deferred taxes based

on the tax it expects to pay. Deferred taxes are calculated by applying the corresponding tax rate to the applicable

temporary differences resulting from comparing the accounting and tax bases of assets and liabilities and including, if any,

future benefits from tax loss carryforwards and certain tax credits. Deferred tax assets are recorded only when there

is a high probability of recovery.

Tax on assets (“IMPAC”) paid through 2007 that is expected to be recovered is recorded as an advanced payment of

ISR and is presented in the consolidated balance sheets decreasing the deferred tax liability.

q. Foreigncurrencybalancesandtransactions- Foreign currency transactions are recorded at the applicable exchange rate in

effect at the transaction date. Monetary assets and liabilities denominated in foreign currency are translated into Mexican

pesos at the applicable exchange rate in effect at the balance sheet date. Exchange fluctuations are recorded as a com-

ponent of net comprehensive financing cost in the consolidated statements of income.

Grupo Gigante

50

r. Earnings per share - Basic earnings per common share are calculated by dividing net income of majority stockholders by

the weighted average number of ordinary shares outstanding during the year. Diluted earnings per share are determined

by adjusting common shares on the assumption that the Company’s commitments to issue or exchange its own shares

would be realized.

4. Cash and cash equivalents

2008 2007 Cash and bank deposits $ 186,181 $ 119,221 Investments in securities available-for-sale 4,569,131 416,270 $ 4,755,312 $ 535,491

5. Accounts receivable – Net

2008 2007 Trade accounts receivable $ 148,923 $ 109,618 Allowance for doubtful accounts (27,947) (6,271) 120,976 103,347 Recoverable taxes 256,441 502,570 Tiendas Soriana, S. A. de C. V. 7,138,607 Other 378,224 72,568 $ 755,641 $ 7,817,092

6. Property and equipment – Net

2008 2007 Buildings $ 5,781,106 $ 5,544,882 Buildings on leased property 1,699,219 1,338,497 Store equipment 1,080,628 746,142 Furniture and equipment 124,054 218,740 Vehicles 100,339 106,941 8,785,346 7,955,202 Accumulated depreciation (1,489,335) (1,055,607) 7,296,011 6,899,595 Construction in-progress 162,978 126,638 Land 6,298,068 5,857,419

$ 13,757,057 $ 12,883,652

2008 Annual Report

51

7. Investments in shares

As of December 31, 2008 and 2007, the investments in shares balance is mainly represented by the investment in the shares of

PriceSmart Inc. of 1,667,333 common shares (a 5.6% and 5.7% participation as of December 31, 2008 and 2007, respectively),

which were purchased on November 23, 2004 at a price of U.S. 10.00 per share. Such investment is accounted for under the

cost method.

8. Goodwill and other assets – Net

2008 2007 Goodwill – Net $ 479,551 $ 476,792 Deferred charges – Net 8,307 6,960 Intangible asset for retirement obligations 17,642 Other non-current assets 5,352 6,697 $ 493,210 $ 508,091

Deferred charges represent costs incurred for internally developed software that meet the specific capitalization requirements

as discussed in Note 3m.

9. Notespayabletofinancialinstitutions

The Company had certain short-term unsecured notes payable due to financial institutions. Outstanding borrowings under

these arrangements amounted to $50,000 and are included in discontinued operations in the balance sheet as of December

31, 2007. The weighted average interest rates under these arrangements at December 31, 2007 were 8.93%.

Seniority premium benefits consist of a lump sum payment of 12 days’ wages for each year worked, calculated using the most

recent salary, not to exceed twice the legal minimum wage established by law. The related liability and annual cost of such

seniority premium benefits and severance payments are calculated by an independent actuary on the basis of formulas defined

in the plans using the projected unit credit method.

2007 With maturity on May 11, 2012; bearing interest at the interbank interest rate (“TIIE”) plus 1.4 basis points. The interest rate as of December 31, 2007 was 9.32%. The Company prepaid this debt in 2008. $ 53,000

Less: current portion (14,000) $ 39,000

10. Long-term debt

11. Employee retirement obligations

Grupo Gigante

52

a. The present values of December 31, 2008, of these obligations and the rates used for the calculations are:

Defined benefit obligation $ (57,713) Plan assets at fair value 5,854 Underfunded status (51,859) Unrecognized items: Past service costs and changes to the plan 17,048 Unrecognized actuarial gains 942 Total unrecognized items 17,990 Net projected liability $ (33,869) Contributions to plan assets 3,805

b. Net discount rates of December 31, 2008 used in actuarial calculations were as follows: % Discount of the projected benefit obligation to present value 8.0 Expected yield on plan assets 1.0 Salary increase 6.0

Unrecognized items are charged to results in over five years, which is the limit established in NIF D-3.

c. Net period cost for the year ended December 31, 2008 is as follows: Service costs $ 11,827 Interest costs 4,067 Expected yield on plan assets (417) Amortization of unrecognized prior service costs 6,729 Actuarial gains and losses – net (3,337) Net period cost $ 18,869

d. Changes in the present value of the defined benefit obligation for the year ended December 31, 2008 were as follows:

Present value of the defined benefit obligation as of January 1 $ 45,156 Service cost 11,827 Interest cost 4,067 Actuarial gain on the obligation (3,337) Present value of the defined benefit obligation as of December 31 $ 57,713

Under Mexican legislation, the Company must make payments equivalent to 2% of its workers’ daily integrated salary

(ceiling) to a defined contribution plan that is part of the retirement savings system. The expense in 2008 and 2007 was

$20,374 and $39,345, respectively.

2008 Annual Report

53

e. The present values of December 31, 2007, of these obligations and the rates used for the calculations are:

Accumulated benefit obligation $ (47,302) Projected benefit obligation $ (50,331) Plan assets 5,753 Funded status – underfunded (44,578) Unrecognized items 35,437 Net projected liability (9,141) Additional liability (36,405) Employee retirement obligations $ (45,546)

Intangible asset for retirement obligations $ 17,642 Balance in stockholders’ equity $ 23,270 Net periodic cost $ 16,185

f. Net discount rates of December 31, 2007 used in actuarial calculations were as follows:

% Discount of the projected benefit obligation to present value 5.0 Salary increase 2.0 Yield on plan assets 4.0

g. Unrecognized items were charged to results based on the average remaining service lives of employees which is nine years.

Net periodic cost of December 31, 2007 is comprised as follows: Service costs $ 8,046 Amortization of unrecognized items 5,664 Interest cost 2,739 Less-yield on plan assets (264) Net periodic cost $ 16,185

a. Common stock consists of the following as of December 31, 2008 and 2007:

Number Number Historical Historical of shares of shares value value

2008 2007 2008 2007 Fixed capital 176,734,102 176,734,102 $ 18,922 $ 18,922 Variable capital 814,187,875 811,903,667 87,172 86,927 990,921,977 988,637,769 $ 106,094 $ 105,849

12. Stockholders’ equity

Grupo Gigante

54

Common stock is comprised of common nominative shares. Fixed capital stock may not be withdrawn. Variable capital

shares may be freely subscribed. Variable capital may not be greater than ten times fixed capital.

b. During 2008 and 2007 the Company sold a total of 3,038,108 and 3,899,988 respectively of its treasury shares, at various

dates and various prices throughout each year, via cash contributions. At December 31, 2008 and 2007, the Company

maintains in its treasury 763,992 and 10,092, shares respectively. The market value of such shares was $12.90 and $22.00,

per share at December 31, 2008 and 2007, respectively.

c. Retained earnings include a statutory legal reserve. Mexican General Corporate Law requires that at least 5% of net

income of the year be transferred to the legal reserve until the reserve equals 20% of capital stock at par value (historical

pesos). The legal reserve may not be distributed, except in the form of a stock dividend, unless the entity is dissolved. The

legal reserve must be replenished if it is reduced for any reason. At December 31, 2008 and 2007, the legal reserve, in

historical pesos, was $21,170 and $21,120, respectively.

d. Stockholders’ equity, except restated additional paid-in capital and tax retained earnings, will be subject to income tax at

the rate in effect when the dividend is distributed. Any tax paid on such distribution may be credited against the income

tax payable of the year in which the tax on the dividend is paid and the two fiscal years following such payment.

e. The balances of the stockholders’ equity tax accounts as of December 31, are as follows:

2008 2007 Contributed capital account $ 9,064,630 $ 8,509,792 Net consolidated tax income account 7,685,132 6,872,472 Net reinvested consolidated tax income account 194,094 $ 16,749,762 $ 15,576,358

a. At December 31, the foreign currency monetary position in thousands of U.S. dollars is as follows:

2008 2007 Monetary assets $ 40,741 $ 659,364 Monetary liabilities (17,593) (65,441) Monetary asset position – Net 23,148 593,923

Equivalent in thousands of Mexican pesos $ 319,442 $ 6,485,639

13. Foreign currency balances and transactions

b. Approximately 11.99% and 7.53% of inventory purchases were impor ted by the Company in 2008 and 2007,

respectively.

c. Transactions denominated in thousands of U.S. dollars during the years ended December 31, 2008 and 2007 mainly

represent import purchases of 44,426 and 162,130, respectively.

2008 Annual Report

55

b. Balances payable to related parties at December 31, 2007, which are included in discontinued operations in the balance sheet, are as follows:

Radio Shack International Inc. $ 54,933 Radio Shack Global Sourcing Inc. 34,577 Tandy Finance Corporation Inc. 32,760 $ 122,270

c. Employee benefits granted to Company key management were as follows:

2008 2007 Compensation cost related to share-based payments $ 3,955 $ 12,796 Salaries 188,599 286,871 Severance benefits 10,553 8,658 $ 203,107 $ 308,325

a. Detail is comprised as follows:

2008 2007 Statutory employee profit sharing $ 5,330 $ 3,086 Loss on sale of fixed assets – Net 7,564 194,177 Contingency provision reversal (220,465) Others 3,281 $ 16,175 $ (23,202)

a. Transactions with related parties during the years ended December 31, 2008 and 2007, carried out in the ordinary course

of business, were as follows:

2008 2007 Interest paid $ $ 3,891 Purchases of inventory 5,967 252,961 Purchases of fixed assets 12,952 9,414 Consulting services received 3,300 Loans received 143,000 Rental expense paid 50,437 84,892

14. Balances and transactions with related parties

15. Other expense (income) - Net

d. The exchange rates in effect at the dates of the consolidated financial statements and at the date of the independent

auditors’ report were as follows:

December 31, February 27,

2008 2007 2009 Mexican pesos per one U.S. dollar $ 13.80 $ 10.92 $ 15.09

Grupo Gigante

56

In 2008, the Company promoted a tax stimulus for technological research before the CONACYT, a resource recognized as

a non-ordinary item for $9,395.

On October 31, 2007, the Company acquired from PriceSmart Inc., the remaining 50% of the shares of its investment in

PSMT México S. A. de C. V., which it did not previously own. As of this date PSMT México, S. A. de C. V. became a wholly

owned subsidiary. The excess of the fair value over the price paid was recorded as a non-ordinary item of $49,038, as pre-

sented in the accompanying consolidated statements of income.

16. Non-ordinary item

In accordance with the Mexican tax law, in 2008 the Company was subject to ISR and IETU, and in 2007 to ISR and IMPAC.

ISR is computed taking into consideration the taxable and deductible effects of inflation. The tax rate is 28%. The Company

pays ISR and through 2007, IMPAC, together with subsidiaries on a consolidated basis.

IETU applies to the sale of goods, the provision of independent services and the granting of temporary use or enjoyment of

goods, according to the terms of the Business Flat Tax Law (the “IETU Law”), less certain authorized deductions. IETU pay-

able is calculated by subtracting certain tax credits from the tax determined. Revenues, as well as deductions and certain tax

credits, are determined based on cash flows generated beginning January 1, 2008. The IETU rate will be 16.5% in 2008, 17.0%

in 2009, and 17.5% as of 2010. The Asset Tax Law was repealed upon enactment of the IETU Law; however, under certain

circumstances, IMPAC paid in the ten years prior to the year in which ISR is paid, may be refunded, according to the terms of

the law. In addition, as opposed to ISR, the parent and its subsidiaries will incur IETU on an individual basis.

In 2007, IMPAC was calculated by applying 1.25% to the net average value of the majority of the Company’s assets, without

deducting any liabilities, and was paid only to the extent that it exceeded ISR payable for the same period.

Based on its financial projections and according to INIF 8, Effects of the Business Flat Tax, the Company determined that it will

basically pay only ISR. Therefore, it only recognizes deferred ISR.

17. Income taxes

a. Income taxes are as follows:

2008 2007

ISR expense (benefit): Current $ 828,951 $ 274,524 Deferred (942,308) (139,299) Change in the valuation of allowance for recoverable tax on assets and benefit of tax loss carryforwards 8,170

$ (113,357) $ 143,395

b. PTU is comprised as follows:

2008 2007 Current $ 4,886 $ 780 Deferred 444 2,306 $ 5,330 $ 3,086

2008 Annual Report

57

c. The main items originating a deferred ISR liability are:

2008 2007 Deferred ISR assets (liabilities): Property and equipment $ (2,091,924) $ (2,178,736) Inventories (77,215) (97,358) Provisions 141,222 Other 31,360 48,705 Deferred ISR from temporary differences (1,996,557) (2,227,389) Effect of tax loss carryforwards 10,343

Valuation allowance for tax loss carryforwards (10,334) Deferred ISR liability – Net (1,996,557) (2,227,380) Deferred PTU liability (1,346) Deferred income taxes and statutory employee profit sharing – Net $ (1,997,903) $ (2,227,380)

a. On December 15, 2008 the Company announced the sale of all shares of Radio Shack de México, S.A. de C.V. and its

administrative service companies Retail Answers, S. A. de C. V. and Logistic Answers, S. A. de C. V. to its international partner

with whom it operated in Mexico, after having exhausted the contractual possibilities of continuing as it had done previ-

ously with this format and association. The sale was made with the objective of obtaining a return on the investment and

thereby taking advantage of other opportunities in the Mexican and Latin American market. In coordination with its foreign

partner, the Company developed and operated the concept very successfully during 16 years.

The transaction with Tandy International Corporation was concluded at a price of $563,288, which the Company received

on December 16, 2008. These resources will allow taking advantage of other opportunities and increasing the profitability

of the Group. The gain on the sale of shares was $436,723, which is included in income from discontinued operations in

the consolidated statement of income.

18. Discontinued operations

b. The effective ISR rate for fiscal 2008 and 2007 differ from the statutory rate as follows:

2008 2007

Statutory rate 28% 28%

Effect of permanent differences (10%)

Effects of inflation (3%) 2%

Tax loss benefits (37%) Other 4%

Effective rate (12%) 24%

Grupo Gigante

58

The equity participation that the Company had in Radio Shack de México, S. A. de C. V. was 50.01% and in its administra-

tive service companies Logistic Answers, S. A. de C. V. and Retail Answers, S. A. de C. V. it was 50.20%.

b. On November 28, 2007, the Board of Directors approved the divestiture of its supermarket business through an opera-

tion with Tiendas Soriana, S. A. de C. V. (“Soriana”).

On December 5, 2007, the Company entered into a sale agreement with Soriana, which includes the transfer of the

rights of the lease contracts that the Company has entered into with third parties to lease the properties where some

of the Company’s stores are located; lease agreements to rent to Soriana the Company’s properties where the rest

of the Company’s stores are located; the transfer of all of the Company’s fixed assets that are used to operate the

Company’s supermarket stores (excluding real estate); the sale of two buildings; the use of the trademark “Gigante”

for a period of four months beginning January 1, 2008; a non-compete agreement whereby the Company and all of

its subsidiaries will refrain from competing with the buyer in the supermarket business and the transfer of all of the

Company’s employees who work in the operation the supermarket stores such that beginning January 1, 2008, Soriana

will become their employer.

At the Ordinary Stockholders’ Meeting held December 24, 2007, the stockholders approved the divestiture of its super-

market operations under the terms of the contract entered into on December 5, 2007.

The major assets of the Company included in the agreement are:

• 205 supermarket stores located in Mexico and in California

• Five distribution centers located in Tijuana, Monterrey, Guadalajara, Tultitlán and Mérida

• Two meat packaging plants located in Mexico City and Monterrey

• Store equipment used in stores and distribution centers

• The enterprise resource planner “SAP” used by the Company in its supermarket business

• Two real estate properties

The related consideration received by the Company during 2007, was recorded as income from discontinued operations

in the consolidated statements of income.

As a result of such operation, the Company decided to tender an offer to repurchase the Senior Notes (the “Notes”)

that it had issued in April 2006, which mature in April 2016. On November 28, 2007 the Company released such offer.

The Company received communication of the acceptance from 91.4% of the notes holders, resulting in 8.6% remaining

outstanding in the markets. The related liability for the outstanding notes is presented as a liability from discontinued

operations. The costs related to the repurchase of the notes are included in net income from discontinued operations.

In accordance with Bulletin C-15, the Company determined that its supermarket business that is being divested repre-

sents a significant business activity since the net revenues generated by such business represented approximately 76% of

the Company’s total revenue and the fixed assets related to the supermarket business represented approximately 36%

of the Company’s total fixed assets.

2008 Annual Report

59

The approval of agreement entered into with Soriana at the ordinary stockholders’ meeting represents the indefinite

discontinuance of the Company’s operations in the supermarket business, since it will not be able to operate its super-

market stores after December 31, 2007.

Based on the above and in accordance with Bulletin C-15, the revenues, costs and expenses as well as the assets and liabilities

identified with the supermarket businesses and the subsidiaries sold, that is being divested are presented in the accompanying

consolidated financial statements of income as a discontinued operations, net of related income taxes.

For comparability purposes, the assets and liabilities as of December 31, 2007 and the revenues, costs and expenses for the year

ended December 31, 2007 identified with the discontinued operation have been reclassified in accordance with Bulletin C-15.

Operating results of discontinued operations and the subsidiaries that were sold have been recorded as discontinued opera-

tions and accordingly they are presented separately from continuing operations.

The amounts used to determine earnings from continuing operations, discontinued operations and diluted earnings per

share were as follows:

2008

Weighted average Mexican pesos Income number of shares per share

Income from continuing operations attributable to majority stockholders $ 1,029,890 989,471,849 $ 1.04 Income from discontinued operations attributable to majority stockholders 1,780,756 989,471,849 1.80 Basic earnings per common share 2,810,646 989,471,849 2.84 Common stock equivalents related to stock option plan for executives 8,224,937

Diluted earnings per share $ 2,810,646 997,696,786 $ 2.82

19. Earnings per share

2008 2007 Revenues from discontinued operations $ 818,548 $ 28,364,021 Costs and expenses (1,169,775) (27,826,922) Other income (expense) – Net 2,982,760 5,827,120 Income taxes (850,777) (2,099,495) Income from discontinued operations $ 1,780,756 $ 4,264,724

Grupo Gigante

60

2007

Weighted average Mexican pesos Income number of shares per share

Income from continuing operations attributable to majority stockholders $ 447,752 985,725,557 $ 0.45 Income from discontinued operations attributable to majority stockholders 4,264,724 985,725,557 4.33

Basic earnings per common share 4,712,476 985,725,557 4.78

Common stock equivalents related to stock option plan for executives 11,024,161 Diluted earnings per share $ 4,712,476 996,749,718 $ 4.73

The Company has entered into operating leases for land, for indefinite periods where some of its stores and restaurants are

located. Rent is calculated as a percentage of sales ranging from 1% to 4%. In 2008 and 2007, rental expense was approxi-

mately $329,178 and $724,708, respectively.

With respect to the rental agreements entered into with Soriana as discussed in Note 18b, such rents are based on a per-

centage of sales at each store.

a. In 1992 the Company acquired its present subsidiary Blanes, S. A. de C. V. (“Blanes”), a company that had 89 stores at that

time. To protect against possible unknown liabilities, the previous shareholders of Blanes (“Blanco“) established a deposit

for three years. At the end of that period, Blanco was not in agreement with the balance subject to refund as determined

by independent public accountants, for which reason they objected to the decision, and initiated a legal proceeding.

In 2003, the legal proceeding concluded through an “amparo” ruling (a constitutional protective right in Mexico) granted

to the Company, which did not fully resolve the matter, leaving the rights of the parties reserved.

In March of 2004, the Company was notified of a new claim filed by Blanco, requiring $150,000, which was the amount of

the deposit originally established, plus the payment of accrued penalty interest at the CETES (Treasury Bond) rate in effect

at the time that payment should have been made, multiplied by two, for each 28-day period from February 9, 1996 until

the time that the amount claimed by Blanco is paid. The Company does not agree with the basis and form of calculation

because it was not established in the deposit agreement and because it had already complied with this agreement.

After having followed all its procedural instances, on August 27, 2007, in compliance with the “amparo” ruling, the Third

Chamber of the Superior Court of Justice for the Federal District, issued a new ruling, which has remained firm, by which

the following was resolved:

20. Commitments

21. Contingencies

2008 Annual Report

61

1. The balance to be paid by Gigante, S. A. de C. V. is the amount of $27,543, in accordance with that determined by

the accounting firm designated by both parties.

2. The payment was approved by Gigante, S. A. de C. V. in favor of Blanco on February 20, 1996, for the amount of

$27,543.

3. Gigante, S. A. de C. V., must pay interest only for the eleven days the payment was past due, with respect to the sum

of $27,543 and not on the total sum deposited. Such interest is calculated applying the Cetes rate multiplied by two,

without capitalization.

4. The application of the amount paid by Gigante, S. A. de C. V. will be made in first instance to the interest mentioned

above and then to the capital, so that payment is pending of a minimum balance of the principal equivalent to the

interest mentioned previously of 11 days. This balance will also bear interest at the same rate currently in force, also

without capitalization, which translates to a minimum amount that Gigante, S. A. de C. V. must pay, which amount does

not exceed $2,000.

In September 2007, Gigante, S. A. de C. V. filed a settlement claim of the court order and deposit with an escrow deposit

of an in-court certificate (Billete de Depósito) for the sum total $1,796.

In January 2008, Blanco also filed an ancillary settlement claim for the payment of penalty interest.

On September 11, 2008, the lower court Judge resolved: a) to declare valid the settlement claim of the ruling filed

by Gigante, S. A. de C. V. and as unfounded that filed by Blanco; b) approval of the amount of $666 pertaining to the

balance of the principal, as well as the amount of $1,130 due to accrued penalty interest from February 10, 1996 to

September 28, 2007.

On September 26, 2008, Blanco filed an appeal contesting the above-mentioned ruling, which was admitted and processed

before the Third Civil Chamber and resolved by means of a ruling on November 13, 2008: a) as partially valid the wrongs

set forth by Blanco and, as a consequence of this, the September 11, 2008 ruling was modified; b) as invalid the incident of

settlement of the ruling filed by Gigante, S. A. de C. V. and as partially valid the incident of execution set forth by Blanco;

c) approved the amount of $666 as the balance of the principal and $176,623 for accrued penalty interest from February

20, 1996 to February 5, 2008.

In December, 2008, the parties filed indirect “amparo” petitions (claiming constitutional protection of rights) contesting the

ruling of November 13 of the above-mentioned year, which are pending resolution.

b. The tax authorities, in the performance of their verification power, are conducting a review of one of the subsidiaries of

the Company regarding foreign trade transactions conducted jointly with some of its suppliers. Derived from the above,

management has recorded a provision of $485,000 for the possible disbursement that this might originate.

Grupo Gigante

62

b. The Company sells its products to the public in general; such products are sold in Mexico and various countries of

Central America. Sales in Central American countries were 6% of total revenues during the years ended December 31,

2008 and 2007.

a. Analytical information by operating segment:

2008

Discontinued operations Retail Restaurants Real estate Other Consolidated

Total revenues $ $ 6,016,275 $ 1,689,723 $ 650,919 $ 28,578 $ 8,385,495

Intersegment

sales 5,455 205 187,587 291,918 485,165

Depreciation and

amortization 14,829 94,066 52,680 130,711 6,341 298,627

Total assets 27,039 3,570,115 1,602,366 10,921,865 5,240,281 21,361,666

Investments in property

and equipment 3,170 390,342 375,622 524,618 6,996 1,300,748

2007

Discontinued operations Retail Restaurants Real estate Other Consolidated

Total revenues $ $ 5,279,362 $ 1,393,434 $ 158,018 $ 3,339 $ 6,834,153

Intersegment

sales 2,763 144,201 455 147,419

Depreciation and

amortization 574,471 87,643 43,389 139,190 7,648 852,341

Total assets 7,223,579 2,683,315 1,350,083 12,208,146 6,735,210 30,200,333

Investments in property

and equipment 734,910 359,652 388,912 136,527 1,620,001

22. Information by industry segment

The main business of the Company is the sale of electronic goods and office supplies through its stores and the operation

of its restaurants.

The information on operating segments is presented based on a management focus in accordance with NIF B-5 “Segment

Information”.

2008 Annual Report

63

In 2008, the Mexican Board for Research and Development of Financial Information Standards (“CINIF”) issued the following

NIFs and INIFs, which became effective for fiscal years beginning on January 1, 2009.

a) For periods starting on January 1, 2009:

NIF B-7, Business Acquisitions,

NIF B-8, Consolidated or Combined Financial Statements,

NIF C-7, Investment Associated Companies and Other Permanent Investments,

NIF C-8, Intangible Assets,

NIF D8, Share-based Payments,

INIF 16, Transfer of Primary Financial Instruments for Trading to another Classification (anticipated recognition is allowed

starting October 1, 2008)

Some of the principle changes are:

NIF B-7, Business Acquisitions, requires fair value measurement of the non-controlling interest (minority interest) as

of the acquisition date and recognition of the overall goodwill at fair value. NIF B-7 establishes that acquisition costs

should not be part of the consideration paid and restructuring costs should not be recognized as an assumed liability

from the acquisition.

NIF B-8, Consolidated or Combined Financial Statements, establishes that special purpose entities, over which control is

exercised, should be consolidated. Provided certain requirements are met, it allows the option to present stand-alone fi-

nancial statements of intermediate controlling companies and requires that potential voting rights be considered to analyze

whether control exists.

NIF C-7, Investments in Associated Companies and Other Permanent Investments, requires that investments in special pur-

pose entities where significant influence is exercised be valued using the equity method. It also requires that potential vot-

ing rights be considered to analyze whether significant influence exists. In addition, NIF C-7 establishes a specific procedure

and sets caps for the recognition of losses in associated companies, and requires that investments in associated companies

be presented including the related goodwill.

NIF C-8, Intangible Assets, requires that any pre-operating expenses not yet amortized as of December 31, 2008 be can-

celled against retained earnings.

NIF D-8, Share-based Payments, sets the rules for recognition of share-based payments (at fair value of goods received or

at fair value of equity instruments granted), including the granting of stock options to employees. Therefore, the use of

IFRS 2, Share-Based Payments, that was supplementally applied is discontinued.

INIF 16, Transfer of Primary Financial Instruments for Trading to Another Classification, modifies paragraph 20 of the Amend-

ments to Bulletin C-2 to consider that in the case that a primary financial instrument trades in a market that for unusual

circumstances beyond the Company’s control ceases to be active, thus losing its liquidity feature, such instrument may be

reclassified as a financial instrument available-for-sale or held-to-maturity, if the instrument has a defined maturity date, and

the Company has both the intention and the ability to hold the instrument through its maturity. INIF 16 includes additional

disclosures related to such transfers.

23. New accounting principles

Grupo Gigante

64

In January 2009, the Mexican National Banking and Securities Commission published modifications to the Sole Circular for Is-

suers to establish the requirement, as of 2012, to file financial statements based on International Financial Reporting Standards

(“IFRS”), allowing for early adoption.

On March 27, 2009, the issuance of the consolidated financial statements was authorized by C.P. Federico David Coronado

Brosig, the Company’s Corporate Chief Finance Officer. These consolidated financial statements are subject to the approval

at the General Ordinary Stockholders’ Meeting, which may decide to modify such Financial Statements according to the

Mexican General Corporate Law.

24. International Financial Reporting Standards

25. Financial statements issuance authorization

b) For periods starting on January 1, 2010, allowing anticipated recognition:

INIF 14, Construction contracts, sell and services render related with real state, complements Bulleting D-7, Construc-

tion contracts and manufacture of certain capital goods, and required the separation of various components in the

contracts in order to define whether the contract involves the construction of real state, sale or services rendered,

establishing rules apply for revenue recognition, costs and associated expenses in accordance with the identification of

the different elements of the contracts. Precisely whent it is appropriate to apply the method of work progress for the

revenue recognition.

At the date of issuance of these consolidated financial statements, the Company has not fully assessed the effects of adopting

these new standards on its financial information.

Investor information

Corporate headquarters


Ejército Nacional No. 769 - A

Col. Granada

Delegación Miguel Hidalgo

11520, México D.F., México

Tel.: (52) 55 5269 8000

Fax: (52) 55 5269 8169

www.gigante.com.mx

Depositary bank

Bank of New York

620 Avenue of the Americas

Nueva York, N.Y. 10011,

USA

CFO

Federico Coronado

Tel. (52) 55 5269 - 8237

[email protected]

Director, Fundación Gigante

Juan Manuel Rosas

Tel. (52) 55 5269-8227

[email protected]

This annual report contains information regarding Grupo Gigante, S.A.B. de C.V. and its subsidiaries, based on the assumptions of its management. This information, as well as statements made about future events and expectations, is subject to risks and uncertainty, as well as to factors that may cause that the results, performance or progress of the Group might differ at any time. These factors include changes in general economic, political, government and commercial conditions on the national and global level, as well as change in interest rates, inflation, exchange-rate volatility, product prices, energy situation and others. Because of these risks and factors, the real results may vary substantially.

Director of Corporate Affairs, Media

Relations and Communications

Sergio Montero Querejeta

Tel. (52) 55 5269 - 8121

[email protected]

Investor relations

Emilia Maldonado Pavón

Tel. (52) 55 5269-8000 ext. 8727

[email protected]

GRUPO GIGANTE is a holding company that is quoted on the Mexican Stock Exchange since 1991.

The subsidiaries in the Group include GIGANTE GRUPO INMOBILIARIO, the division that operates and develops real estate projects, RESTAURANTES TOKS which operate under the concept of “casual dining”, and the SUPER PRECIO stores, which offer permanent discounts.

The Group also has a share in OFFICE DEPOT, the largest and most important chain of office supplies and furniture, stationery and electronic items in Mexico and Central America.

Through FUNDACIÓN GIGANTE, GRUPO GIGANTE has institutionalized social responsibility programs, strengthening a tradition and commitment that began more than four decades ago.

Contents

1 Financial Highlights

2 Report of the Chairman of the Board

and Chief Executive Officer

6 Office Depot

10 Restaurantes Toks

14 Super Precio

18 Gigante Grupo Inmobiliario

22 Fundación Gigante

26 Report of the Audit Committee

28 Report of the Governance Committee

30 Report of the Finance and Planning Committee

32 Report of the Strategic Consulting Committee

34 Board of Directors & Committees

35 Financial Statements

Regional distribution of stores

Metropolitan areaCentral areaNorthNortheast

SoutheastSouthwestCentral America

15%

4%

11%

7%2% 4%

Sales breakdown by format

Office DepotSuper PrecioRestaurantes Toks Gigante Grupo Inmobiliario

9%

8%

20%

Sales Floor Area by Format Units Sq. Feet

Super Precio 126 30,758

Restaurantes Toks 85 18,134 (seats)

Office Depot 189 252,494

Total 400 283,252

63%57%

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Cert no. SGS-COC-2420

2008 Annual Report

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